One of the first people that picked interest in taking up a micro pension scheme for his retirement savings when it was initially announced in the pension industry was Kenneth Uzoukwu, a 39 years old Nigerian comedian.
Uzoukwu, like many other self employed people who earn so much from their crafts have no structured savings plan meant to take care of them at old age.
They earn so much from their trade, and as the money comes so it is also spent. Their income is not regular, but when it comes, it is always big.
For Uzoukwu who realised that personal savings at will without any structured scheme has not helped him build reasonable resources for old age pensions, had said he could not wait to see micro pension people approach him.
Who is talking to this population; what should they do, and how can they access the scheme, some of the informal workers ask?
Uzouku’s plight is that he always goes to withdraw from his savings and most times for things that he later regrets, and believe that a structured savings scheme will enable him save better and build capacity for retirement benefits.
The expectation about the scheme, which targets to provide old age protection plan is that contributors will have the opportunity for savings withdrawal benefit as well as pension benefits. The flexibility is the selling point, which is that contributors use the same scheme for immediate and short term needs, while also remaining protected for pensions.
The scheme being developed by the National Pension Commission (PenCom) as an offshoot of the Pension Reform Act 2014 that targets to extend the CPS to the informal sector, is looking at a flexible system that captures the peculiarities of the target population.
Contributions are to be split into two with a smaller percentage going for savings and accessible to the contributor, while the greater percentage shall be strictly set aside for pensions.
This scheme like the CPS has individual portable retirement savings accounts that will be managed by Pension Fund Administrators (PFAs) while the funds will be kept in custody of the Pension Fund Custodians (PFCs).
According to PenCom, in order to achieve the Pension Industry’s strategic objective of covering 30 percent of the working population in Nigeria under the CPS by the end of 2024, the Micro Pension Plan is being given impetus as an initiative that would ensure the coverage of this important segment of the Nigerian economy.
Sequel to the formal launch by President Muhammadu Buhari in March, 2019, the registration of contributors has commenced under the Plan., PenCom said.
As the pension industry works towards commencing a robust enlightenment campaign to educate informal sector workers of the enormous advantages of the Micro Pension Plan, it is expected that the sector would embrace the opportunity.
The need for provision of pensions and most especially to the self employed informal sector workers, experts say is as result of the clearly breakdown of the family support system which hitherto helped parents at old age.
Besides that, there is the need to avert old age poverty, even as it has become a global trend and has been implemented in certain jurisdictions like India, Kenya and Ghana
Section 2(3) of the Pension Reform Act, 2014 extended coverage of the Contributory Pension Scheme to self-employed persons with the objective to avail the contributor access to regular stream of retirement income at old age and improve living standards of the elderly.
Besides, it will enable contributors benefit from the various incentives to be offered by the PFAs; deepen financial literacy and inclusion, secures financial autonomy & independence of retirees; passage of wealth to survivors in the event of death; increases national savings and long term funds; promotes growth and development of the capital, mortgage and insurance markets and overall positive effect on the national economy as pension asset increases.
The informal sector being discussed here is largely uncovered by any structured pension arrangement and represents over 70 percent of Nigeria’s total working population.
The objectives of the Pension Reforms are to ensure that every person who worked in either the Public Service of the Federation, Federal Capital Territory or Private Sector receives his retirement benefits as and when due.
It is also to assist individuals by ensuring that they save in order to cater for their livelihood during old age and thereby reducing old age poverty; and also to ensure that pensioners are not subjected to untold suffering due to inefficient and cumbersome process of pension payment.
It also aims at establishing a uniform set of rules, regulations and standards for the administration and payments of retirement benefits for the public service of the federation, federal capital territory and the private sector and stem growth of outstanding pension liabilities.
Modestus Anaesoronye
