Micro pension contributors to enjoy savings withdrawal, retirement benefits

Self employed informal sector workers who have lived their work­ing life without a formal structured sav­ings arrangement targeted at retirement would soon benefit from the country’s micro pension scheme.

The beauty of the scheme, which targets to provide old age protection plan is that contributors will have the opportunity for savings withdrawal ben­efit as well as pensionbene­fits. The flexibility is the selling point, which is that contributorsuse 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,and targets to extend the contributory Pension Scheme (CPS) to the infor­mal sector workers, is look­ing at a flexible system that takes into cognisance 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 when con­cluded will have like the CPS, anindividual portable retirement savings account that will be managed by Pension Fund Administra­tors (PFAs)while the funds will be kept in custody of the Pension Fund Custodi­ans (PFCs).

The need for provision of pensions and most espe­cially to the self employed informal sector workers, experts say has become necessary as result of the clearly breakdown of the family support system that hitherto held sway in our society.

Besides that, there is the need to avert old age pov­erty, even as it has become a global trend and has been implemented in jurisdic­tions like India, Kenya and Ghana

Polycarp Anyanwu, head, Micro Pensions De­partment, National Pension

Commission(PenCom)at the recently concluded Media Seminar for Finance, Insurance and Pension Journalist organised by PenCom in Calabar, de­scribed micro pension initiative as a scheme that exists for the provision of pension coverage to self-employed persons.

Speaking on the theme “Understanding Micro Pen­sion Scheme: Features, Prospects and Expecta­tions” Anyanwu said the Commission’s target is the self-employed in various trades and professions in Nigeria including artisans, accountants, lawyers, me­chanics, tailors, market men/women, hair dress­ers, architects, engineers among others.

He stated that the micro pension scheme is an off­shoot of the Pension indus­try 5-year strategic plan to expand the coverage of the CPS to 20 million contribu­tors by 2019. According to him, this will cover three strata of the population in the society which include the lowest, middle and high income earners within the informal sector.

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 as well as improves the living standards of the elderly.

Besides, it will enable contributors benefit from the various incentives to be offered by the pension fund operators; deepen financial literacy and inclu­sion, secures financial au­tonomy & independence of retirees; passage of wealth to survivors in the event of death;

increases national savings & long term funds; promotes growth & de­velopment of the capital, mortgage and insurance markets, and overall posi­tive effect on the national economy as pension asset increases.

The informal sector ac­cording to available statis­tics is largely uncovered by any structured pension and represents over 70 percent of Nigeria’s total working population.

Some of the peculiari­ties of the individuals that operate within the informal sector that is hoped would benefit from the micro pen­sion scheme include irreg­ular flow of income, highly mobile and flexible jobs, lack of permanent work address, lack of official means of identification and other documents, typically excluded from pension systems prior to PRA 2014 and they are also largely uneducated.

EFInA Access to Finan­cial Services in Nigeria 2014 survey shows that the total adult population of Nigeria is 93.5 million and 37.6 million adults represent­ing 40.1 percent of the total adult population operate within the informal sector. It also show that8.6 million adults, that is 9.2 percent of the adult population get their main source of income from the formal sector while 49.4 million adults, that is 52.8 percent of the adult population is under 33 years.

The result of the survey further shows that 58.7 million adults, that is 62.8 percent of the adult popu­lation own a mobile phone.

While the Nigerian Bu­reau of Statistics (NBS) also show that Nigeria’s GDP as at the end of 2015 was about N94.1 trillion, out of which N38.7 trillion is from the informal sector while N55.3 trillion is from the formal sector

The report according to the NBS is a confirmation that the nation’s informal sector remains a critical part of the economy, mean­ing therefore that it holds a lot of growth potential that needs to be developed to achieve a holistic growth in the economy.