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An assessment of adequacy of pre-retirement savings for sustainable retirement income under the Nigerian 2014 pension scheme

Author

Listed:
  • Sogunro Ashim Babatunde

    (Department of Actuarial Science and Insurance, Faculty Business Administration, University of Lagos, Akoka, Yaba, Lagos, Nigeria)

  • Adeleke Ismaila Adedeji

    (Department of Actuarial Science and Insurance, Faculty Business Administration, University of Lagos, Akoka, Yaba, Lagos, Nigeria)

  • Ayorinde Richard Olusegun

    (Department of Actuarial Science and Insurance, Faculty Business Administration, University of Lagos, Akoka, Yaba, Lagos, Nigeria)

Abstract

Aim/purpose – The main objectives of this article are to estimate percentage of preretirement savings that is needed, based on the current salary scale, to sustain academic and non-academic staff of Federal Universities in Nigeria in retirement using University of Lagos as a case study. Design/methodology/approach – The methodology of the article was designed by modifying the life-cycle model of household behaviour combine with the target replacement ratio benchmarks for different income levels as used by Pension Commission 2004, expressed in 2013 earning terms. Finding – The research findings show that the lowest income earner with entry age of 25 years and retirement age of 65 years should, without any interruption throughout the service years, contribute a minimum of pre-retirement savings of 28.01% on an annual basis from his or her emolument to maintain the pre-retirement standard of living once he/she has ceased working. Research implications/limitations – The scope of this research study is subjected to some limitations: (1) scarcity of pension financial data in Nigeria; (2) the academic and non-academic staff of Federal Universities in Nigerian using University of Lagos as a case study. Originality/value/contribution – The study has established the minimum contribution rate into the Retirement Savings Account so as to meet the internationally acceptable replacement ratio for employees of the Nigerian Federal Universities.

Suggested Citation

  • Sogunro Ashim Babatunde & Adeleke Ismaila Adedeji & Ayorinde Richard Olusegun, 2019. "An assessment of adequacy of pre-retirement savings for sustainable retirement income under the Nigerian 2014 pension scheme," Journal of Economics and Management, Sciendo, vol. 35(1), pages 150-171, March.
    • Handle: RePEc:vrs:jecman:v:35:y:2019:i:1:p:150-171:n:2
    DOI: 10.22367/jem.2019.35.08
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    References listed on IDEAS

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    4. Alicia H. Munnell & Anthony Webb & Luke Delorme & Francesca Golub-Sass, 2012. "National Retirement Risk Index: How Much Longer Do We Need to Work?," Issues in Brief ib2012-12, Center for Retirement Research, revised Jun 2012.
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    More about this item

    Keywords

    adequacy; replacement rates; actuarial assumptions; salary-scale and consumption smoothing;
    All these keywords.

    JEL classification:

    • B26 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Financial Economics
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • D15 - Microeconomics - - Household Behavior - - - Intertemporal Household Choice; Life Cycle Models and Saving
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory

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