The empirical analysis of cash balance pension scheme implementation in Nigeria

Abstract

The study tested the equality of the expected mean retirement outcomes of the cash balance, dened contribution and dened benet pension plans in three workplace scenarios in Nigeria that differed only on how monthly wages of employees are computed at entry into the schemes but contingent on employee's experience and desirable skills. The analyses are based upon the values obtained from the actuarial valuation models that incorporate assumptions that satisfy Nigerian pension statutory requirements. The results show that the cash balance mean gratuity and the cash balance mean pension are individually higher than those of the traditional schemes in all the three cases studied. We therefore conclude that cash balance plan offers the most rewarding retirement benets to participants, and thus it deserves introduction into the Nigerian pension market.

Keywords: cash balance plan, dened benet plan, dened contribution plan, gratuity, pension, pension replacement rate