Adequacy, Affordability and Sustainability of Pensions in Higher Learning Institutions in Zambia ()
ABSTRACT
Old-age poverty is as old as the human race, yet to
this day, the fight against this beast
rages. The fight against old-age poverty is certain, and so is the need to provide retirement income. The stakeholders of the University of Zambia (UNZA), Copperbelt University (CBU) and Mulungushi
University (MU), particularly the government, expressed sustainability
and affordability concerns over the existing pension systems in the three
public universities. Eventually, the government directed the institutions to
undertake pension reform to abolish second pillar plans. The study aimed to
evaluate the adequacy, affordability and
sustainability of pension systems at UNZA, CBU and MU. The study adopted
a quantitative approach in which adequacy, affordability and sustainability
indicators of the pension system were assessed considering data recorded within
the last ten years. Survey questionnaires were used to gather data from 360
respondents. Data were analysed using SPSS Pearson
correlations to evaluate the relationships between variables and sensitivity
analysis techniques. Quantitative information was gathered from the financial
statements of the universities over a ten-year horizon. The results indicate
that the pension systems are adequate at the Zambian HDI of 64 but inadequate
at the Sub-Saharan HDI of 69. On the other hand, affordability and
sustainability performance indicators highlighted the financial stress the existing
pension systems exert on the financial position of the three institutions. The
pension liabilities grew by an annual average of 41% for UNZA, 19% for CBU and
35% for MU. In addition, the gearing ratios stood at 265% for UNZA, 248% CBU
and 81% MU. Pension liabilities expressed as a proportion of current assets;
the ratios stood at 841% for UNZA, 336% for CBU and 25% for MU. The liquidity
indicators demonstrate the financial challenges the universities face in paying
retirees. The sensitivity analysis of the financial information projects
continued growth of pension liabilities resulting in further delayed liquidation of pension benefits. Therefore, the
study projects increased old-age poverty, which is detrimental to the
performance and reputation of the higher learning institutions in Zambia. With
the poor performance of key pension
indicators, the public universities face the daunting task of reforming the existing models to fight
old-age poverty. The fight against old-age poverty is a collective
responsibility that should endeavour to improve the lives of
retirees rather than exacerbate the situation as the directive to reform seems to
cause in the public universities. The study recommends design concepts
encompassing risk management, prefunding and key pension performance indicators
as dictated by actuarial assumptions. Furthermore, the study recommends a
pension model that embraces the critical key design principles that make the
fight against old-age poverty easier without abandoning the financing
mechanism.
Share and Cite:
Yohane, R. , Mwanza, B. and Chowa, T. (2022) Adequacy, Affordability and Sustainability of Pensions in Higher Learning Institutions in Zambia.
Open Journal of Business and Management,
10, 2768-2789. doi:
10.4236/ojbm.2022.105137.
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