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Assessment of Pension Fund Management Practice in Ethiopia: The Case of Public Servant Social Security Administration (PSSSA) and Private Organisations Employees Social Security Administration (POESSA

International Journal of Financial Management

Volume 13 Issue 2

Published: 2023
Author(s) Name: Dakito Alemu Kesto, Tsinat Alemayehu | Author(s) Affiliation: Addis Ababa University, CoBE School of Commerce, Ethiopia.
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Abstract

Pension funds provide income in retirement years. To accomplish this, they collect monthly contribution throughout the working life of beneficiaries and engage in investment activities. Rising inflation rates, higher life expectancy, increment to payments make it difficult for contributions alone to suffice the payment of benefits sustainably. Thus, for pension funds to fulfill their organisational objective of providing income for beneficiaries in their retirement years, investment has to be managed well. In addition to achieving the purpose of social insurance, the investment of pension funds boosts economic growth, resource mobilisation and operation of stock markets. Understanding the importance of pension fund management, this research attempts to assess the pension fund management practice of Public Servant Social Security Administration (PSSSA) and Private Organisation Employees Social Security Administration (POESSA). It attempts to assess the investment identification procedure, measure of performance, opportunities and challenges faced. It is descriptive research, where interview of respondents was analysed qualitatively to assess the aforementioned objectives. The researcher found that both PSSSA and POESSA used to engage in investment activities per directives of MOFED (previously MoF), but since 2022, they are in the process of drafting their own investment guideline and policy. The measurement and accounting standard used to measure performance were found to be inappropriate. The primary opportunity for the pension funds was participating in the capital market soon to emerge. Threats to the pension funds were lack of skilled manpower, rising contribution payments, inflation and behaviour of certain beneficiaries. The researchers recommends the critical evaluation of guidelines, proper measurement and disclosure of performance, account for the pension fund using IPSAS, train and outsources to contest the lack of skilled manpower.

Keywords: Pension Fund, Capital Market, Management, Social Security, Reporting Framework

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