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Studies On The Level Of Old-Age Insurance System In Sierra Leone

Posted on:2012-01-19Degree:DoctorType:Dissertation
Country:ChinaCandidate:L M Z L BuFull Text:PDF
GTID:1116330338454479Subject:Population, resource and environmental economics
Abstract/Summary:PDF Full Text Request
Social pension security system is in close connection with economic development. Sierra Leone is in the period of economic transition, which poses new problems that need solving to the perfection and reform of social pension security system as well as the requirement for sustainable development with long term plan. In the research of Sierra Leone's social pension security system, it's required to comb its fundamental theories and value orientation of institutional policy, better guide the reform of its practice, and make its sustainable development possible to provide stabilizing mechanism for Sierra Leone's economic development and improve national living quality.The paper, from the angle of policy space, recombs the existing economic theories on social security, especially the mainstream neoclassical economic theory with great influence in order to screen out the core of fundamental theories that can be used. Based on that, it puts forward the countermeasures and suggestions adjusting Sierra Leone's social pension security system.The objects of the paper are the level of old-age insurance of Sierra Leone's social pension security, its link with economic running, its choice of modes, the sustainability of its financing modes, its choice of modes and feasibility, etc. The paper, using foreign experience of research and reform for reference, begins with fundamental theories on social pension security system and the analysis on its value orientation of the institutional policy, analyzes the problems during Sierra Leone's decade of social pension security system reform and puts forward the suggestions on the basis of the practical process of reform and innovation in Sierra Leone's social pension security system.Chapter 1:Introduction.This chapter discusses the paper's background and its significance of selecting the topic, conducting a survey of viewpoints of school of economic theories on social pension security system as well as social policy theory and briefly introducing the framework of the paper.Chapter 2:Economic theory and policy theory on social pension security system. Thischapter interprets political economy,neoclassical economic theory and Maxims theory, and conducts analysis of the theories in terms of many respects like its births background, developments and the policy implications,etc, focusing on identifying the essential position and the application of neoclassical economic theory in the development of post-war social pension system.Chapter 3:Analysed the nature, problems and causes of old-age insurance system in Sierra Leone.The main conclusion is that retirement programs (mainly of a social assistance nature) have been basically designed for civil servants and major public and sometimes private enterprises. The majority of these regulatory frameworks were implemented during the 1960s through 1970s, directed especially to expatriates and minor group of indigenous people. The nature of these retirement systems does not allow for ample coverage and therefore excludes the majority of the population from formal retirement.Furthermore, replacement rates are too low given the low standard of living in these countries and the way in which these retirement systems were designed does not allow for adjustment to the cost of living. The result is that the standard of living of the elderly has been declining. Because of the poor benefit payments and sometimes even negative payouts, individuals may perceive contributions to retirement systems as a tax rather than a price paid for services offered; with the result that evasion may occur.Finally, the establishment of the pension scheme in Sierra Leone represents a singular achievement in public policy implementation over the past 30 years and if properly executed and managed long-term will serve generations of workers and contribute positively to economic and social development of the country. It is thus in accord with the tremendous expectations for success of the scheme that the above critique and suggestions for curtailing the run away administrative costs of the Trust are been proffered not only to management but especially the Board of Directors.Chapter 4:Moderate level of old-age security in Sierra Leone.With regards to Sierra Leone's basic pension insurance, the enterprises and individuals' paying rate is high. According to the actual data of Sierra Leone's present labor factor distribution coefficient and pension bearing coefficient, the paper analyzes the moderate degree of Sierra Leone's social pension security, proofing that Sierra Leone's present basic pension security level has been above the lower limit of moderate degree. The enterprises and individuals'paying rate is over-high, under the circumstance that our labor factor distribution coefficient is much lower than theoretical data.The responsibility of enterprises and individual is over-high, as well as the responsibility of government is over-low. It suggests that inclining the paying rate and increasing the expenditures of government.Chapter5:Analysis of the effects of the level of old-age security in Sierra Leone. The level of pension insurance by the selection of measurement methods, measuring the level of old-age security model building. According to the theoretical framework of neoclassical economics to discuss the Social Security system and pension income redistribution, national savings, industry, regions and departments and other aspects of relationships. Economic aspects of the use of social security and national economy to run the interaction between macro variables, we can see old-age security system is not only a social institution, is an economic system.Chapter 6:Policies and proposals. Through the analysis of Chapter 5 above Sierra Leone should establish a comprehensive pension system covering the entire population, multi-level, personalized pension system. In accordance with the demand theory of rural social old-age security system it demonstrates that the informal sector reform, pension system employees in the establishment of rural social viability of the pension system was proposed based on the level of local economic development. Reasonable adjustments claim the proportion of the national pension insurance contributions, and to reform the National Social Security and Insurance Trust. This theory with practice, learn from foreign experience, and the gathering house prevail in Sierra Leone Social Security Pension System Reform and Improvement of policy recommendations.The main points and conclusions are as follows:(1)The establishment of the pension scheme in Sierra Leone represents a singular achievement in public policy implementation over the past 30 years and if properly executed and managed long-term will serve generations of workers and contribute positively to economic and social development of the country. It is thus in accord with the tremendous expectations for success of the scheme that the above critique and suggestions for curtailing the run away administrative costs of the Trust are been proffered not only to management but especially the Board of Directors.(2) REPEAL THE NASSIT MONOPOLY:For with the inability of the NASSIT to provide the requisite financial safety net, based on the current actuarial projections, it is but prudent that government seeks to break up the NASSIT's near monopoly over pension fund management in Sierra Leone to allow not only life insurance and annuity companies but more so retirement funds to establish and manage employer-sponsored retirement plans.The NASSIT model is akin to the Social Security system in the United States which as a hybrid defined contribution and defined benefit plan, establishes and sets a fixed percentage both employees and employers contribute and also defines the benefit formula participants receive at retirement. As a result of conservative projections and outright ill-advised investments with little or no redeemable value-added equity to be realized in some investments even in the long term, the NASSIT cannot be solely relied on by Sierra Leonean workers for their retirement needs.With the repeal of the NASSIT monopoly, employer sponsored retirement plans and annuities, with an investment and insurance component will be established and marketed to allow employees to save and invest in their own retirement.(3) Reasonable adjustment of national pension insurance contribution rate.Tax incentives and deferrals are usually provided by governments to encourage retirement planning, savings and participation. Amounts contributed by employees into such plans are not taxable resulting in a larger carry home paycheck monthly. Moreover, as an employee benefit, employers also contribute a percentage into their employees' retirement accounts, with a concomitant tax savings by the employer.However, the provisions of The First Schedule Part IV of the Income Tax Act,2000 which requires a 15% withholding from payments on pensions and annuities needs to be repealed as it is regressive and discourages retirement savings. It is also envisaged that employee contributions are on a pre-tax basis so that employees participating in these retirement funds can take advantage of favorable tax brackets and rates. As an example, the tax rate for individuals with incomes over 480,000.00 Leones is 25% per annum while the tax rate for individuals earning over 7,500,000.00 Leones is 40%. (4) It's fitting for Sierra Leone to adopt pay-as-you-go system as social pension financing mode.Under the circumstance that Sierra Leone's actual labor growth rate, wage growth rate and real interest rate growth rate all meet the Aaron condition now and in the long run, it claims that Sierra Leone adopt the financing mode of pay-as-you-go system, uses nominal account system for reference to solve the problem of transition cost incurred by the implementation of social pooling and individual account combination as well as that of individual empty account running.(5) Finally, the study concludes that in Sierra Leone policymakers have to pay more attention to institutional arrangements that would accommodate the implementation of a proper social security system. The starting point should be reforms of existing retirement schemes. Reforms should be initiated within the existing schemes, through the introduction of the principal-agent management model with strong regulation and monitoring to ensure sound management principles. The informal sector poses a major challenge and should be included in a social security system also allowing competition from possible providers of social security products to the informal sector.The redesign of retirement schemes should be aimed at regional integration with scale economies to be captured both at country and regional levels. This implies that the number of operators in the industry should also be considered to avoid excessive costs related to marketing and the administration of the funds. Another important conclusion is that retirement reform programs should form part of the overall strategies of poverty alleviation currently being implemented in many sub-Saharan countries.
Keywords/Search Tags:Social pension Security Level, Moderate level of old-age security, Old-age security level, National Social Security and Insurance Trust (NASSIT), REPEAL THE NASSIT MONOPOLY, Sub-Saharan Africa(SSA)
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