The millennial and the Contributory pension schemes- Odunze Reginald C

Image credited to independent.co.uk

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 are 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 millennial are placing money aside for retirement — as long as they have a job.”

It has been argued the contribution pension scheme is the main thing as most countries around the globe are migrating from the Defined Benefit Scheme to the Defined contributory scheme.

For contributors retiring within the next 10 years, they will not understand the beauty of the scheme, but for the fresh graduate of 25 years who may be expected to be in the scheme for the next 35 years, either to retire at the age of 60 or 35 years of service. They will understand better.

By 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.

In a recent forum in Lagos, the AGM , public sector, National Pension Commission,  Mr. Mamman  noted that those that are entering the service at this time will be more favored than those already in the service , this is in agreement with my earlier postulations titled “ Will the Millennial  be entitled to bond” which appeared in Reginald odunze.com, in the article Odunze noted that the Millennial will be better than the present contributors based on the contributory pension scheme.

A rough estimate of the schemes indicates that even with a contribution of (Ten Thousand Naira) 10,000.00 with a zero retirement savings balance, making an annual savings of 120,000 on 9 percent interest rate with 3 percent inflation rate with life expectancy of 87 will have = N=26,936,446.54 while with 30000 monthly with the same parameters will give =N=80,809,339.61 with a monthly pension of =N=236,387.60. That’s a whole lot of money bearing in mind that the industry average is almost 13 percent.

From the analysis above which I used the pension calculator to calculate, it all means that the Millennial are more favored with contributory  pension scheme than the defined benefit scheme.

The 50+ Worker: Talented, Vital, But Where's The Demand?-By Jim Emerman

Two studies released in the last two weeks characterize the value and strengths of older workers in the American economy — and decry their under use in the American workplace.

Last week, the Employee Benefit Research Institute (EBRI) released its 2015 Retirement Confidence Survey and found, among other things, that the percentage of people expecting to work past age 65 continues climbing, to an all-time peak.
Now, 36% say they expect to work beyond that age, with one in 10 planning never to retire. This is a threefold rise since 1991, when only 11% planned to work past 65. Today, a whopping 67% plan to work for pay in retirement. Yet the percentage of retirees actually working part-time continues to hover around 25% as it has since 1998; it was 23% this year.

The Work in Retirement Gap
That gap between people planning to work in retirement and those actually working is no mystery. As I told Anne Tergeson of The Wall Street Journal, employers have not yet embraced older adults with open arms.
This week, AARP released a study reprising and updating its 2005 report on the business case for hiring the 50+ worker. A Business Case for Workers Age 50+: A Look at the Value of Experience, prepared by Aon Hewitt (a talent, retirement and health-solutions firm), showed that the arguments for hiring experienced workers have grown stronger in just about every way over the past decade.

When combined with the latest report from the Society for Human Resources Management, which indicated that only about a third of their members were weighing policies and practices related to an aging workforce, AARP’s new study should serve as a jangling wake-up call to employers.

AARP’s strongest arguments are twofold:
First, contrary to conventional wisdom, older workers do not cost their employers significantly more than younger workers. Adding more 50+ talent to a workforce “results in only minimal increases in … labor costs,” AARP said. The incremental total compensation costs of retaining and recruiting more 50+ workers turned out to be between less than 1% and 2% in four industries: engineering, financial services, health care and retail.
Changes in compensation practices — moving from tenure- to performance-based compensation schemes, the decades-long shift from defined benefit to defined compensation retirement plans like 401(k)s and a slowing in the rate of health care insurance costs — mean that these days older workers are not particularly more costly to employ than their younger colleagues.
What’s more, seasoned workers are far less likely to leave jobs and projects unexpectedly than younger ones. Aon Hewitt’s database revealed that nearly half of employees under 50 say they would consider another job offer or are actively looking. In contrast, fewer than three in ten workers over 50 say they’re job-hunting or open to offers.
With the cost of unplanned turnovers running between $7,400 and $31,400 per employee, depending on the industry, greater stability translates into bottom-line security for companies with a higher census of mature workers.
Second, data from Aon Hewitt and Gallup indicate that workers who are 55+ are more engaged and motivated than younger workers. According to Aon Hewitt, 65% of 55+ workers are engaged, compared to 60% of workers overall. (The study defines engagement as consistently speaking positively about the employer, having an intense desire to be part of the organization and exerting an extra effort to contribute to business success.)

The study connects the dots between these qualities and a direct effect on business success: A 5% difference in engagement translates into a 3% increase in revenue, it noted.
Higher levels of engagement among older workers correlate to the extra-monetary values they derive from their jobs, including pride in their work, seeing a job as an important part of personal identity, continued personal growth and a feeling that there is still a lot to accomplish in their work.
The Dilemma Businesses Face
Interestingly, but perhaps not surprisingly, these are precisely the same extra-monetary values that Encore.org has identified as most present in those people seeking encore careers — those who plan to contribute to the greater good in their communities when they leave their current jobs.
All this raises an interesting dilemma for businesses that invest in mature workers: How should companies retain this talent and keep their levels of engagement high when many of these workers appear to be drawn to a next career that would offer them the opportunity to give back?
I’d point to the experience of Intel, which a few years ago gave all of its U.S.-based retirement-eligible employees the opportunity for a fully paid Encore Fellowship upon retirement. (The fellowship lets them explore opportunities in the nonprofit sector for the next stage of their careers.) Intel has found that the Encore benefit has kept those nearing retirement more engaged.
By showing that it understands and values mature talent, Intel has positioned itself as an employer of choice — improving its attractiveness to younger employees, allowing the company to retain older talent and managing retirements in line with the firm’s strategic needs.

But pioneering can be lonely work. Intel and a few other corporate innovators are riding the cutting edge of the encore movement, integrating the needs and assets of older workers even as they move into new forms of employment. Other firms seem far less aware of the opportunities mature workers represent or of the rising tide of experienced workers who seek to continue working into their 60s and beyond.

There’s a lot of valuable data collected in AARP’s new report, enough to make a pretty unshakable case for harnessing the talent of mature workers in the marketplace — and plenty of food for thought for employers.

Culled from Forbes.com

DEVELOPING SUCCESSFUL STRATEGIES FOR A HAPPY RETIREMENT-ODUNZE REGINALD

Image credited to telegraph.co.uk

In his book, “The Prince” a book on political philosophy, Machiavelli stated that the destination is far more important than the journey; he was so engrossed with it that he came up with a political maxim that still stands till today, “the end justifies the means”

And in the film Transcendence, a film on Artificial Intelligence, Dr Caster and his team noted that the journey is far more important than the destination.

But the views of financial and retirement planners are different; they believed that the journey is as important as the destination.  So is all aspect of life, the journey of any event, program, study is by far better than its destination. If the journey is well planned, the destination will be great, and if the journey is haphazard then its destination can be a dismal failure. Pension is not an exception.

In his books, “The magic of getting what you want”, and “The magic of thinking big Schwartz” noted that human beings and individuals expecting to make change in their immediate environment should be willing to prepare their 5 minutes obituary and by preparing their 5 minutes obituary, they will be able ascertain if they have achieve their expectations in life. So also should workers be able to prepare for their own retirement even when they are still working, by carrying out their pension calculations, they will be able to extrapolate in advance, their likely expected pension pot and their pension’s benefits. They will also be able to plan in advance how much they intend to make and collection as their lump sum and monthly pensions.

From these two illustrations, it can be observed that in every aspect of life careful planning, checks, measures are necessary for a better deal. Even in life, James Schwartz noted in preparing ones obituary, you will be able to ascertain what you have achieved at a particular age. In pension one should make it a duty to at one time or the other to ascertain what his or her pension pot is, bench mark it with your benefits, salaries , allowance accruable to you now, by so doing you will know whether you are making a headway or not in achieving the required pension pot. There is also need for a pension calculator.

There are steps to achieving that and according to Wall Street cheat sheet “TCRS offers the following three strategic steps for achieving retirement readiness and success:

1. Save for retirement. Start saving as early as possible — and as much as possible to maximize potential compounding of investments. Save consistently over time. Avoid taking loans and early withdrawals from retirement accounts as they can severely inhibit the growth of long-term retirement savings.
2. Calculate retirement savings needs, develop a retirement strategy, and write it down. In creating a plan, consider lifestyle, living expenses, healthcare needs, government benefits, and other factors, as well as a backup plan in case retirement comes early due to an unforeseen circumstance.
3. Get educated about retirement investing. Whether relying on the expertise of professional advisers or taking a more do-it-yourself approach, gain the knowledge to ask questions and make informed decisions. Seek assistance from a professional financial adviser, if needed.” (Wall street cheat sheet)”

But in having a worthwhile retirement is a basically a function of the strategies put in place in achieving that.  Strategies according to Anao are schemes, maneuvers, and methods, plans which organizations or individuals hope to deploy in order to function effectively, Retirement is essential one of the basic facts of life, and people save for two basic reasons, to make lots of money and to provide for the retirement. And according to a recent research, people are more likely save to cater for their retirement than to be rich.

The problem of financial crises and the increase in the working age in United Kingdom and the United states has made people to start planning heavily on the retirement, coupled with a recent development where scammers target retires because of their vulnerability indicate a positive trend in having a good retirement strategies as most whites return back to work having discovered that their pension pot could not carry them through during their retirement. These are the basic strategies for retirement:

1 Save for retirement: saving for retirement is a basic requirement in life especially in Africa where there is no social security. Saving for retirement in Africa is fast becoming important as the modernization has gradually eroded African system of social communism where in most communities; people gather together build houses for old people who do not have children to cater for them. As this has eroded, it becomes increasingly important to start saving for old age

2 Make s rough estimate of retirement savings needs, the saving need is a strategic issue as most retirees came to the sudden realization that what they are getting as their lump sum is not enough, coupled with their desire to get a house and a car from their lump sum which is barely enough to cater for their immediate needs.

3 Develop a retirement strategy, it is very important to fashion a well defined retirement strategy. Transamerica Center for Retirement Studies (TCRS), noted that in developing a retirement strategy, it is important to do the following “create a plan , In creating a plan, consider lifestyle, living expenses, healthcare needs, government benefits, and other factors, as well as a backup plan in case retirement comes early due to an unforeseen circumstance

4 Know a lot about retirement investment, it is the inability for contributors knowing about investment that often drove them to annuity. Contributors should at one time or the other gets investment advice from their pension fund administrators. They can do this by attending forum organized by the various Pension Fund Administrators to get adequate information on investment strategies

5 Maintain a positive attitude towards life and pension inclusive; according to book of job what people fear most always comes to them. And according to Robert Schuler, in his book , “the power of positive thinking “ he noted that  one of the basic ingredient of success is maintaining a positive outlook to life, believe that you will make and you will make it, believe that you will not , and you will definitely not”

Therefore maintaining a positive attitude in all aspect of life is pre requisite for all facets of life and Le Boeuf (1987:21) noted that “your world is a mirror and your mind is a magnet what you perceived in this world is largely a reflection of your own attitudes and beliefs. And life will give you what you attract with your thoughts. Think, act and talk negatively and your world will likely be negative. Think, act and talk with enthusiasm and you will attract positive results.

6 Do additional Voluntary Contribution: It is also important to embark on additional voluntary contribution as the mandatory provision of 15 percent is not quite enough and I strongly commend the Federal government of Nigeria for increasing to 18 percent.  Individuals should be willing to additional voluntary contributions, the gain of AVC far more outweigh its impediments, especially now the tax is on the revenue, and not in the principal, if you are withdrawing below 5 years.

Pension is a great destination, and it requires careful journey , which comprises planning, adequate contributions, monitoring pension pot and as you endeavor to that, you will discover like Dr Caster and his team that the journey is very important as its destination. 

Odunze Reginald C

Lead Consultant, Charge Consulting