Micropensions, informal sector to dominate sector activities in 2016

The pension sector in Nigeria has come of age having achieved giant strides in the past 10-years of successful implementation of the Contributory Pension Scheme(CPS), following the Pension Reform Act 2004 as amended in 2014.

The scheme called the CPS, which grew from over N2 trillion pension liability in 2004 under the Defined Benefit Scheme (DBS) to over N5.7 trillion as at the end of November 2015, has no doubt bought stability, security, guarantee for workers and increased contribution to the economy.

Beginning from this New Year 2016, activities in the sector would be dominated by discuss on how to expand the pension catch net to ensures that players in the informal sector are brought into the scheme.

Like the National Pension Commission (PeCom) have said during a close interaction with Media partners late last year, the focus of the Commission has gone beyond amount of pension assets but on the number of Nigerians that benefits from the scheme.

Chinelo Anohu-Amazu, director general, PenCom it is important for us here in the Commission that more informal sector employees come under the scheme so that they can benefit from a secured savings partner that guarantees protection of their future particularly in retirement.

The informal sector occupies a huge population of the nation’s workforce that must be captured into the country’s Contributory Pension Scheme (CPS). To realize the objective of the scheme, which is targeted at ensuring that every person who worked in either abthe public Service of the federation, federal capital territory, states and local government or the private sector receives his retirement benefits as and when due, this segment of the populace is inevitable.

This untapped market no doubt requires a lot of efforts by all stakeholders including operators and regulators to find possible means of exploring the market.

In 2015, PenCom commenced a nationwide dialogue with self-employed persons and workers in the informal sector ahead of the commencement of the Micropension scheme in the country.

Micro Pension is a financial programme for the provision of pension services to self-employed persons and informal sector workers. The programme has been successful in India, Kenya, Ghana and other countries even as it is expected to take off in the country this year.

Anohu-Amazu addressing participants at one of its workshop onCPS for Self Employed Tailors and Garment Workers in 2015 said the Federal Government plans to bring the over 50 million workers in the informal sector into the CPS using the micropension initiative.

She said Government hopes to bring at least 20 million informal sector workers and self-employed persons into the Scheme in the next four years and assured that necessary arrangements were being put in place to ensure a smooth take off of the Scheme. “Take care of your financial needs in old age now that you are working, not later. Whatever you gain here please share with your colleagues at the branches and local units,” Anohu-Amazu admonished.

Also, the Head of Research and Corporate Strategy Department at PenCom, Farouk Aminu who presented a paper titled “Contributory Pension for Self Employed Tailors and Garment Workers” reviewed extensively the features of the CPS and the Pension Reform Act, 2014 with emphasis on coverage, access to retirement benefits under the scheme and the Pension Protection Fund (PPF).

He assured the workers that PenCom understood that the informal sector is characterized by the abthesence of formal structures; low and irregular incomes earned by workers except those on fixed salaries, highly mobile and flexible jobs, lack of permanent work address in many instances and is ready to ease the stress associated with registration and participation for the target workers.

Farouk said the above peculiarities require special registration and customer service platforms even as the Commission is anticipating erratic contributions, remittance and withdrawal arrangements.

PenCom, he added, hopes to make the scheme flexible to accommodate workers in the informal sector and self-employed persons, adding that the Commission is ready to partner trade associations, Non-Governmental Organization (NGOs) and religious bodies to make the Scheme work, he added.

The Head of Research and Corporate Strategy at PenCom also highlighted some of the benefits that self-employed people and workers in the informal sector could reap by participating in the Scheme saying in addition to providing them income in their old age and inculcating a savings culture through highly protected and regulated investment, the scheme would afford them the opportunity to connect to other programmes of government while helping to finance infrastructure across the country.

They could as well use the balance in their Retirement Savings Accounts (RSAs) as equity contribution for residential mortgages and support their businesses and benefit from other micro-credit schemes and special awareness programme affiliated to the scheme, he said.

He stated that additional benefits to self-employed persons and informal sector workers include the cover provided under the Pension Protection Fund (PPF), explaining that under this arrangement, Government would bridge shortfalls or financial losses from investment of their accumulated retirement savings and guarantee them minimum pension in retirement, irrespective of how much they are able to save before retiring.

This initiative will be funded by an annual subvention of 1 per cent of monthly wage of Federal Government employees, annual levy on PenCom and pension operators as well as pension fund investment income, he explained.