Ebere Nwoji writes on the importance of the micro pension scheme
One of the remarkable reforms instituted by the former president Olusegun Obasanjo’s administration was the introduction of the Contributory Pension Scheme (CPS), which replaced the hitherto non-funded Defined Benefit Pension scheme.
The CPS, which is funded in nature with the employee contributing eight per cent to his Retirement Savings Account (RSA) and his employer contributing 10 per cent every month gave workers in both public and private sectors, especially the formal sector workers, future hope but left a gap in non -coverage of the informal sector workers.
However, 16 years after the creation of the institution of the CPS, president Muhammadu Buhari, gave a boost to the scheme through the launch of the micro pension scheme, with informal sector operators who were not covered by the CPS as the prime target.
At the launch of the micro pension scheme, the president had said the initiative was to address the exclusion of millions of traders, farmers and other entrepreneurs from the different pension programs in existence.
He said it was part of his administration’s plan to ensure the inclusion of all Nigerians in the basic services.
Disclosing the position of his administration regarding the well-being and future of informal sector operators in Nigeria, president Buhari had said, “In the past three years, we provided grants, concessionary loans and technical support through our SME clinics to farmers, traders and SMEs. We have seen lives positively change because of these initiatives.
“The micro pension plan is the natural next step. The program guarantees that when these hard working citizens retire, they can still live in dignity and comfort.
“At this juncture, I would like to encourage trade associations, unions, non-governmental organisations and other stakeholders in the informal sector of our economy to join hand with the government and the pension industry to enlighten their members and the general public on the benefits of the micro pension plan,” he said.
Going by federal government’s plan, the initiative is expected to cover an estimated 80 million people working in the informal sector of the economy, including market women, the National Union of Road Transport Workers, members of textile, garment and tailoring associations, tricycle operators and Okada riders.
Others targeted for capture under the scheme are butchers associations, workers in the movie and performing arts industry, mechanics and other workers in the automotive industry and single professionals like lawyers, accountants among others.
The Acting Director General National Pension Commission (PenCom), Mrs Dahir-Umar, recently said the commission is targeting about N3 trillion and 20 million contributors through the scheme.
According to her, the micro pension plan, has been well simplified to suit the target contributors. For instance, she said under the initiative, 40 per cent of the amount contributed could be accessed by contributors for contingency purpose while the balance of 60 percent would be set aside for retirement benefit.
She explained that while contributors could start drawing from their 40 per cent contributions after three months of making the initial deposit, the 60 per cent balance could only be accessed at the age of 50 or during retirement.
The PenCom boss projected that the successful implementation of the micro pension scheme has the potential of reducing poverty level by 85 per cent.
“This event is remarkable because it unveils a unique financial product, which democratises the savings culture in Nigeria in a systematic and efficient manner.
“The product also perfectly aligns with the current social empowerment programmes of the federal government, as it seeks to ensure, in the long-term, the sustainability of the benefits of the empowerment programmes for the participants, who may seize this opportunity to save for their old age.
“Our objective is to ensure efficiency and effectiveness in service delivery as well as transparency and accountability in the administration of the product by licensed pension operators,” she had said.
To drive the scheme, PenCom and the pension fund operators, said they have developed information technology to support the micro pension distribution plan.
On the benefit of the scheme to the targeted contributors, the pencom boss said, “The implementation of the micro-pension plan will improve the standard of living of the informal sector participants at retirement and reduce dependence on extended family for support at retirement.
“The plan, when operational would 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.”
Section 2(3) of the Pension Reform Act, 2014 legal framework extends the coverage of the CPS to self-employed persons through the micro-pension scheme.
According to her, additional benefits to self-employed persons and informal sector workers include the cover being provided under the Pension Protection Fund.
She explained that under the arrangement, the government would bridge shortfalls or financial losses from the investment of their accumulated retirement savings and guarantee them minimum pension in retirement, irrespective of how much they were able to save before retiring.
She also said the plan would be funded by an annual subvention of one per cent of the monthly wage of federal government employees, the annual levy on PenCom and pension operators as well as pension fund investment income.
On their part, Pension Fund Operators said there is no doubt that the initiative was the future of the pension sector and the economy in general.
The operators said they are strategising to reap the gains of the scheme and give hope to self- employed Nigerians and small scale business operators who ordinarily would not test the benefits of pensions savings a chance to save for the future and escape old age poverty.
Long before the formal launch of the micro pension scheme, many PFAs were expected to have calibrated their internal processes and operations to accommodate the new group of retirement savings account holders.
For instance, Stanbic IBTC Pension Managers Limited, which currently controls N2.8 trillion assets out of the total N8.7 trillion total pension assets in the country, recently demonstrated its leadership position in the industry through the launch of its own micro pension scheme tagged, “Game Plan. Retire Well.”
The PFA at the media launch of its micro pension plan said it considered the pension reforms necessary to maintain the strength and depth of the country’s CPS, adding that part of its engagement with the media was not only to intimate and educate them on the micro pension plan but to also demonstrate its readiness for the micro pension plan.
Some of the engagement platforms Stanbic IBTC Pension Managers had instituted to continue to engage stakeholders include town hall meetings and public awareness programs.
The PFA, said it has a dedicated 24/7 customer care line that can engage its clients in English and the four major Nigerian languages – Pidgin, Hausa, Igbo and Yoruba.
Stanbic IBTC Chief Executive Officer, Eric Fajemisin, explained that the micro pension plan was meant to insulate those not covered in the formal sector of the economy as well as low-income earners against old-age poverty.
“The micro pension plan will equally help in deepening asset accumulation in the country,” he added.
According to him, the scheme would provide the crucial capital required for investment in critical sectors of the economy.
“As an initiative designed to cover an estimated 70 per cent of Nigeria’s working population in the informal sector, the scheme offers enormous benefits to the society, regardless of challenges associated with its seamless implementation,” he said.
According to him, among its benefits is improved standard of living for the elderly, safety of funds and access to other incentives, such as reduction in their dependency on the younger generation, flexible contribution remittances, the opportunity to make withdrawal prior to retirement and the enhancement of financial inclusion in the country.
Fajemisin explained that with offices in over 200 locations across the country and its electronic platform to engage the technology minded clients via internet or the Stanbic IBTC mobile app, it was clear that Stanbic IBTC Pension Managers is truly ready to onboard the Micro Pension customers
The PFA also pledged its readiness and commitment to contributing its quota through its ‘Game Plan – Retire Well’ campaign.
According to the PFA, the effort is aimed at sensitising and stimulating the informal sector not covered by the current CPS to secure their buy in into the pension scheme.
Speaking on the campaign, Fajemisin said, “it is our call out to stakeholders to secure their future and reinforce the need to save and plan for retirement, irrespective of the nature of their jobs or the profession they may find themselves in.
“It is all about taking a decision today by signing up for a retirement plan, making the right move now towards a secure future or simply put, having a game plan,” he said.