The Contributory Pension favors Millennial – Odunze Reginald C

Who are the Millennial, according to Millennial Legacy, “Millennial are the generation born between 1982 and sometime in the early 2000’s. However, these boundaries aren’t set in stone. Some definitions have the Millennial Generation starting as early as 1978 and starting as late as 1985. Basically, if you born a little earlier than 1982 and you consider yourself to be more Millennial than Generation X, that is your opinion. Or if you were born in or just after 1982 and you feel that you are more Gen X than a Millennial, the same applies. It is really up to the individuals born during the cusp years (late 1970’s to early-mid 1980’s) to decide which generation they feel a stronger connection to”

Continuing it stated that “The digital generation is providing some hope for the retirement crisis. After watching their parents suffer through two major financial bubbles and the weakest economic recovery on record, the majority of millennials are placing money aside for retirement — as long as they have a job.”

By my simple calculation, the first batch of millennial are expected to access their retirement benefit between the period 2039 and 2042. And the real millennials are expected to access their retirement benefit between 2050 and 2060. Will it be enough? Will it match the value of the bond of their predecessors?  This therefore calls for an individual’s calculation of the estimated pension pot based on your expected date of retirement.

Wikipedia noted that “In a defined contribution plan, contributions are paid into an individual account for each member. The contributions are invested, for example in the stock market, and the returns on the investment (which may be positive or negative) are credited to the individual's account. On retirement, the member's account is used to provide retirement benefits. Defined contribution plans have become widespread all over the world in recent years, and are now the dominant form of plan in the private sector in many countries. For example, the number of defined benefit plans in the US has been steadily declining, as more and more employers see pension contributions as a large expense avoidable by disbanding the defined benefit plan and instead offering a defined contribution plan.

Continuing Wikipedia noted that “In a defined contribution plan, investment risk and investment rewards are assumed by each individual/employee/retiree and not by the sponsor/employer and these risks may be substantial. The "cost" of a defined contribution plan is readily calculated, but the benefit from a defined contribution plan depends upon the account balance at the time an employee is looking to use the assets. So, for this arrangement, the contribution is known but the benefit is unknown (until calculated).”

One of the key beneficiaries of the defined contribution scheme has been the millennial, and so what is its impact on the pension. The impact is far reaching as the millennial is believed to contribute more than the generation X. the reason is that they came when pension is well structured having moved from the defined benefit of the National Provident Fund, NSITF  that were products of defined benefit scheme.

Contributions then were small and its attendant problems, it becomes difficult then to have a meaningful contribution , the impact of no data base, corruption and Government inability to provide these fund as at the time of retirement made the scheme to be a nightmare.

But the millennial came during the time of Pension Reform Act 2004 and with the recent amendment leading to Pension Reform Act 2014. The Millennial  are better equipped to benefit from the pension scheme.

Odunze Reginald is the Lead Consultant, Chareg Consulting, a management and marketing  consultant  a social media and social marketing consultant , you can visit our twitter anchors @dunzereg, @regydunze, find us on Facebook @ Reginald odunze and reginaldodunze.com, at google+ @ Reginald Odunze and at Linkedin@reginald odunze.