Tackling the fear of retirement among Nigerians

A major task that faces each and everyone of us working today is how far we have planned to continue our life after work. And this no doubt makes retirement planning an important aspect of our personal and national life. MODESTUS ANAESORONYE looks at the subject matter, the increasing national consciousness and stakeholder commitments.

Recently, President Goodluck Jonathan, at an elaborate ceremony at the Presidential Villa, Abuja, signed into law the Pension Reform Act 2014, repealing the Pension Reform Act of 2004, which heralded the Contributory Pension Scheme (CPS) into the country. Less than a week after the law came into effect, Abuja, Nigeria’s capital, played host to the first edition of World Pension Summit Africa Special.

Both events, the summit in particular, helped to restore the primacy of pension and retirement planning in the national consciousness, while strengthening the efforts of Pension Fund Administrators (PFAs) and the National Pension Commission (PenCom) to create awareness and deepen pension uptake in the country.

Though President Goodluck Jonathan disclosed during the World Pension Summit that Nigeria’s pension sector has grown from a deficit of N2trn in 2004 to over N4.21trn in accumulated pension assets by March 2014, some significant gaps still remain in the system.

For instance, a critical question remains: How well prepared are Nigerians for retirement? Not many can respond to this poser with self-assurance. And the reason: retirement planning has not gained a strong foothold in the country yet. Some of the other difficult questions that come to mind are: Will I be able to maintain my current lifestyle when I retire? How safe are the funds I am currently saving? How do I finance emergencies such as health issues and the children’s education during retirement? Have I saved enough?

Getting retired, however, is as inevitable as growing old, says Demola Sogunle, the chief executive officer of Stanbic IBTC Pension Managers Limited, one of Nigeria’s leading pension fund administrator. It is a fact of life that things easily get done when there is a well-drawn out plan on how to achieve them, Sogunle observes, adding that Nigerians should get used to the reality that retirement is inevitable and therefore should concentrate on planning for that eventuality.

Another challenge in pension fund administration is similar to the challenge faced by banks, which is how to integrate the informal sector, the biggest employer of labour, into the formal financial sector. Many workers and entrepreneurs in the informal sector, especially in the small and medium scale enterprises (SME) sector are completely shut out from the protection and benefits which the Contributory Pension Scheme offers.

How does a shop owner, for instance, key into the expertise and safety of funds offered by PFAs? How should PFAs respond, or manage people in the informal sector who do not have defined, regular income? How should PFAs publicise the key benefits of the nascent pension regime to the SME sector and help to bring employees and workers/owners therein into the formal pension system?

It was majorly to address some of the problems associated with pension administration in the country that the Contributory Pension Scheme was established via the Pension Reform Act of 2004, which has now been upgraded through the Pension Reform Act of 2014.

Furthermore, incidents of ghost pensioners and widespread mismanagement of pension funds have been largely addressed through the imposition of very stiff penalties for pension funds fraudsters  and employers who persistently fail to deduct and/or remit pension contributions of their employees within the stipulated time. The Act also compels an employer to open a Temporary Retirement Savings Account (TRSA) on behalf of an employee that fails to open a Retirement Savings Account within three months of being employed.

Another crucial issue, experts say, is how to effectively communicate and enlighten Nigerians on the enormous benefits derivable from retirement planning as embedded in the pension law, and in the process, stimulate interest and uptake. PenCom, the sector regulator, has in the past few years launched several initiatives to deepen pension awareness in the country. Among these are workshops, seminars and interactive sessions, in collaboration with key stakeholders. Here lies the essence of some notable initiatives launched by some industry operators.

For instance, Stanbic IBTC Pension Managers Limited last year introduced its pre-retirement seminar series, its thrust being to prepare workers approaching retirement on life after work. So far, the series has held in Lagos, Abuja and Port Harcourt.

Important issues discussed at the seminars include: preparation for retirement, accessing retirement benefits; health at retirement and investment opportunities for post-retirement. Other PFAs are also doing something in that line. Interestingly, State Governments are beginning to see the need to prepare civil servants for life after service.

The Lagos State government recently organised a pre-retirement seminar for 1,200 of its workers “to prepare them ahead of the challenges associated with life outside the public service,” stated Rotimi Hussain, the director general, Lagos State Pension Commission.

For people who approach retirement with concern, such seminars serve to calm the nerves and open the participants’ eyes to opportunities presented by retirement. The key lessons from the Stanbic IBTC seminar, according to Sogunle, include the need for retirement education and professional assistance, noting that even the best athletes have coaches.

Rather than agonise over life in retirement, people are being enlightened on the prospect of a healthy and happy post-retirement life. About six years ago, Stanbic IBTC Pension ran a TV commercial of a very young – probably 40 years or slightly above – retiree, well-heeled, having a leisurely afternoon by the pool in his plush home.

“He was going through the newspapers, with a cocktail on a stool beside him. Then suddenly he smiled. What that illustrated were contentment, bliss, good health, and financial security  and that PFA means “you could retire rich and early too if you pre-plan your retirement”.

Some key steps to a fun-filled retirement, according to experts, include starting to save early and regularly; deciding on investment vehicles that will deliver good returns; investing frequently; prioritisation and reduction of unnecessary expenditure; and diversification of retirement portfolio.

MODESTUS ANAESORONYE