By Cynthia Ezekwe
The National Pension Commission (PenCom) has urged the informal sector operators in Nigeria to embrace micro pension plans ahead of their retirement, or incapacitation.
Micro Pension Plan (MPP) refers to an arrangement under the Contributory Pension Scheme (CPS) that allows the self-employed and persons working in organisations with less than three employees to make financial contributions towards the provision of pension at their retirement or incapacitation.
PenCom made the call at the maiden micro pension open day organised by the Pension Operators Association of Nigeria (PenOp) tagged “Micro Pension – Challenges, Prospects for Growth and Deepening Financial Inclusion in Nigeria,” held recently in Lagos.
The micro pension plan formally launched by the Federal Government in March 2019, was introduced pursuant to the provisions of Section 2(3) of the Pension Reform Act (PRA) 2014, which allows employees in organisations with less than three employees and self-employed persons to participate in the Contributory Pension Scheme (CPS) on voluntary basis.
According to financial experts, the MPP presents an opportunity for workers who are mainly in the informal sector to save for their retirement, adding that recruitment of more Nigerians especially those in the informal sector into the micro pension basket represents a sure way of including more Nigerians into the financial system in view of the multiplier effects of the scheme.
Some key features of the plan include the ease of entry with minimal documentation requirements, flexibility of contributions, including amount and frequency with provisions for withdrawal of a portion for unforeseen emergencies as well as opportunity to convert from informal to mandatory plan upon securing formal employment.
The MPP is targeted at members of the various trade groups which include fashion designers, mechanics, cooperative societies, hairdressers, commercial vehicle operators and related market associations, professionals in private practices, etc.
Speaking on the strategy to attract the 2.2 million participants into the scheme from the informal sector of the economy, Dauda Ahmed, the head, of the micro pension department, PenCom, said as part of incentives to embrace micro pension, the commission is working toward adopting a minimum health insurance for eligible MPP participants.
Ahmed also stated that the commission is also engaging with labour unions, trade associations, and several groups on embracing the scheme in the country.
He said currently MPP contributions as of May this year stood at N435.61 million from 97,591 participants registered, while the total contingent withdrawal by 150 Micro Pension Contributors (MPC) as of the month under review stood at N30.24 million, and the commission recorded N6.51 million as the amount converted by 581 Retirement Savings Accounts (RSAs) holders, under the informal sector to RSA’s under the formal sector.
Ahmed however pointed out that the major constraints to the MPP are lack of awareness, mistrust about the pension system, absence of appropriate incentives, and lack of financial literacy, noting that the Pension Fund Administrators (PFAs) based MPP on short-term perspectives, especially in terms of financial benefits and the perceived associated cost.
On his part, Paul Oluikpe, head of the financial inclusion department of the Central Bank of Nigeria (CBN), urged industry stakeholders to concentrate more efforts on activating plans and strategies capable of helping in deepening the pension fund industry considering the crucial roles of pension in achieving bigger band for financial inclusion in the country.
Oluikpe, challenged pension fund operators to be more creative in product designs, introducing products that hold multiple benefits to serve as an anchor in attracting more into embracing the scheme.
“We have to sufficiently target specific segments of the society with varying needs meaning that operators must remain innovative and creative with services and products. We need to rethink our old ways”, he added.