Annuity Policy Adoption and Retirement Management in Nigeria

Private saving in Nigeria has increasingly become important and the insurance landscape has also become more complex in terms of the range and type of financial products available for retirement plans and management. The specific objectives of this study are to examine the level of adoption and utilization of annuity by retirees in retirement management and also to ascertain the persistent constraints in annuity adoption in retirement management in Nigeria. The study adopted a theoretical review approach in intersecting strands of literature to explore the reality of annuity adoption in retirement management in Nigeria. The theoretical framework of study is anchored on the Life Cycle Savings Theory. The findings reveal that annuity policy has grossly been underutilized due largely to non-adoption of the policy in the Nigerian context in spite of its numerous advantages. It was also discovered that the factors constituting major constraints to the adoption of annuity policy in retirement management in Nigeria include adverse selection, actuarial unfairness, bequest motive and social network, health uncertainty, administrative cost and lack of inflation protection in commercially available annuities. Significantly, the enactment of the Pension Reform Act (PRA) 2014 and subsequent regulatory interventions by the National Pension Commission (PenCom) including the Revised Regulation on Retiree Life Annuity (2020), the Revised Regulation on the Administration of Retirement and Terminal Benefits (2022), and the introduction of the Micro Pension Plan (2018) have substantially reformed the landscape within which annuity products are administered in Nigeria. The policy implication of these findings is that non-adoption and underutilization of annuities continue to retard the development of the annuity market in Nigeria, notwithstanding the improvements introduced by the PRA 2014 framework.