Rising unemployment calling for expansion in pension coverage

The rising level of unemployment in the country and its attendant impact on income generation, suggests that there is going to be a challenging old age for most people who could not work in the organized labour, either public or private sector.

The implication is that majority of the citizens who may be unable to work in organized labour environment are not likely to participate in the Contributory Pension Scheme (CPS) for their old age retirement income.

This means further that there is growing tendency for old age poverty unless something is done urgently.

Unemployment Rate according to the National Bureau of Statistics, Nigeria increased to 10.40 percent in the fourth quarter of 2015 from 9.90 percent in the previous period. The number of unemployed persons went up by 518 thousand to 8 million and labour force population rose by 1 million to 76.95 million

To address these challenges, there is need to support ongoing effort for expansion of pension coverage through the micro pension scheme.

Given the importance of pensions as a safety net, therefore, there is the need to develop urgent solutions to enable active participation in the informal sector.

Chioma Ojiakor who works at the micro pension department in the National Pension Commission (PenCom) making a presentation on the theme “Concept Framework and Need for Micro Pensions in Nigeria” during a Media Retreat organized by Pension Fund Operators Association of Nigeria said micro pension is a long term voluntary financial plan for the provision of pension coverage to the self-employed, persons working for organisations with less than 3 employees and the informal sector workers.

She said it is a Pension Industry strategic initiative to have an inclusive and expanded Coverage, stating that it has been implemented successfully in India, Kenya, Ghana and other countries

“The target is to extend coverage to a total of 20 million Nigerians by 2019 and 30 million by 2024”

Speaking further Ojiakor stated that there are a number of benefits which participants will enjoy in keying into the scheme including simplicity of processes – multichannel platforms; flexible contribution remittance; ability to make withdrawals; access to other incentives; there will be returns on investments; safety of funds is guaranteed; passage of wealth to survivors of the deceased RSA holder in case of death and improves living standards for the elderly.

Ojiako said “We know the issues of withdrawal is critical in making the system a success, so the micro pension guideline when completed will ensure that there is a fflexible withdrawal process; simplified to aid participation for the target workers; multichannel platform for ease of access and detail of withdrawal will be spelt out in the Micro Pension guidelines.

On the Commission’s strategy, Ojiakor said the there is plan for increase awareness and knowledge of Pension in general through many channels as well as Increase Financial education– via public awareness campaigns.

PenCom had recently said the Micro Pension programme has kicked off targeting about 50 million self-employed persons and informal sector workers into the CPS. The Nigerian informal sector is characterised by absence of formal structures, low and irregular incomes earned by workers except those on fixed salaries, highly mobile and flexible jobs, no permanent work address in many instances.

There are also many Small and Medium Enterprises (SMEs) with less than three employees, household workers and many more that are eligible to participate in the Contributory Pension Scheme (CPS) under the micro-pension initiative. These will add up to the myriads of motorcycle riders, taxi, bus and truck drivers, food vendors and other hawkers as well as artisans and self-employed people. Micro Pension is very attractive to this group of workers since it if offering them a platform to live a life of comfort in retirement. The scheme targets entertainers, technicians, drivers, tailors, fashion designers, barbers and hair dressers as well as other artisans and professionals plying their trades at different levels across the country.

All informal sector workers who earn more than they can consume on a daily basis are also being targeted under the micro-pension initiative.

As encapsulated in a post by Aiico pension managers limited, with micro pension in place, Pension Fund Administrators now need to engage Agents and more aggressive Marketers to market the scheme and help with collection and remittance of contributions considering that very soon small market men and women, Okada riders and others will key into the scheme to save for their old age.

The objective of the Pension Reform Act 2014 is 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; (b) assist improvident individuals by ensuring that they save in order to cater for their livelihood during old age; and (c) establish 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”.