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Attracting N3trn To Pension Assets Through Micro Pension Concept



With about 50 million potential pension contributors residing in the informal sector yet to be captured in the new pension scheme, the micro pension scheme is aimed at persuading these people into the pension system, thereby mobilising about N3 trillion from this informal sector into the N8.23 trillion pension assets. ZAKA ABD-KHALIQ writes

The aim of every worker is to retire well after putting in so much while in active service. The certainty, however, is that not all could retire well, except for those who have pension plan.

The enactment of the Pension Reform Act (PRA) 2004( now PRA 2014) which paved way for the introduction of the Contributory Pension Scheme (CPS), brought great relief to pensioners as they were saved from the hardship suffered by their colleagues who retired under the Define Benefit Scheme (DBS).

The CPS, within 14 years, grew the pension assets from  a deficit of almost N2 trillion in 2004 to a robust contributors’ fund of N8.23 trillion as at the end of June, 2018, a feat achieved through proper implementation of regulatory policies and initiatives.

However, with only eight million workers from private and public sectors joining the scheme, out of about 80 million working class Nigerians, the National Pension Commission (PenCom) came up with micro pension scheme to capture people in the informal sector of the economy and expand the outreach of the new pension scheme.

Though the scheme is yet to commence, if it finally takes off, it will generate about N3 trillion to the pension assets, while it intends to mobilise about 12 million contributors within five years.

It was in a bid to capture self-employed people, especially those with irregular income, usually in the informal sector and are largely financially uninformed with limited or no access to financial services especially pension plan that the idea of micro pension struck.

Stakeholders’ Reactions To Micro Pension Concept

Former head, Micro Pensions Department of PenCom, Mr. Polycarp Anyanwu, said, micro pension, directly addresses breakdown of family support, averts old age poverty as it engages and extends pension to the large working population that are self-employed.

He said PenCom’s target is the self-employed in various trades and professions in Nigeria – artisans, accountants, lawyers, mechanics, tailors, market men/women, hair dressers, architects, engineers, among others.

Section 2(3) of the Pension Reform Act, 2014 legal framework, he stressed,  extended coverage of the Contributory Pension Scheme to self-employed persons through micro pension scheme.

The scheme, if it finally takes off, he said, will generate  about N3 trillion to the pension assets, while mobilising about 12 million contributors within five years.

Despite the success of the new pension scheme, there are still some grey areas begging for serious attention

Highlighting the challenges of the scheme, chief executive, Stanbic IBTC Pension Managers Limited, Mr. Eric Fajemisi, listed them to include: insufficient awareness and negative perception towards it, modest financial literacy in the country, high cost of promoting awareness on CPS, lack of reliable data on the informal sector and low buy-in by unions in the pension sector, among others. These challenges, he noted, must be addressed prior to commencement of the scheme and thereafter.

Fajemisi said, on the other hand, the micro pension scheme, when finalised, would ensure improved standard of living for the elderly, guarantee the safety of funds and may provide access to other incentives, such as mortgage facilities and health insurance.

According to him, other benefits would include flexible contribution remittances, the opportunity to make withdrawal prior to retirement and the enhancement of financial inclusion and attainment of economic stability objectives.

He described the proposed micro pension scheme as having the capacity to deepen asset accumulation in Nigeria, which will also provide the vital capital required for investment in critical sectors of the economy.

President, Pension Fund Operators of Nigeria (PenOp), Mrs. Ronke Adedeji, while explaining reasons for the neglect of the informal sector by the current pension arrangement said, continuous job changes, likely opts to self-employment, temporary nature of employment contracts, limited experience in dealing with formal financial institutions, frequent need for liquidity, among others, are factors that isolate them from formal pension arrangements.

Therefore, she said, PenCom decided there was the need to have a separate arrangement that will address the pension needs of the informal sector, hence, the micro scheme.

Adedeji, who is also managing director/CEO, Leadway Pensure PFA, said, the scheme is an arrangement for the provision of Pension and Retirement Benefits to the low income, self-employed and persons operating in the informal sector, adding that the formulation of such scheme require a delicate balance between economic viability, generation of adequate returns and customized features for the participants.

The planning and execution of micro-pensions, she said, is a missing link in increasing pension coverage in Nigeria, stating that full implementation will be a major economic booster and will reduce the level of poverty associated with informal sector and old age.

On her part, acting director-general, PenCom, Mrs. Aisha Dahir-Umar, while speaking at the third national conference of the National Association of Insurance and Pension Correspondents (NAIPCO) in Lagos at the weekend, noted that her commission has released the draft guidelines and framework on the micro pension plan to the Licenced pension operators and the various stakeholder, adding that, feedback from the stakeholders and operators have been received, considered and incorporated.

She said the final guidelines for the Micro Pension Plan(MPP) will be released as soon as they are approved.

Meanwhile, the Commission, she said, is developing the required ICT infrastructure to drive the process as this is critical to the success of implementing the Micro Pension Plan. It is envisaged that before the year ends, the plan will commence, she disclosed.



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