PenCom: Targeting informal sector’s potentials to grow CPS
R-L: Sunmisola Mark-Okoma, Pal Pension; the Executive Secretary, PenOp, Sussan Oranye, the Head Corporate Communication PenCom, Peter Aghahowa,; MD ARM Pension, Wale Odutola; MD Diamond PFC, Chinedu Ekeoha at the 2018 Media Retreat organized by PenOp for Pension Correspondents in Lagos.
Poised to expand its frontiers, increase benefits and grow Contributory Pension Scheme (CPS) in Nigeria, the National Pension Commission (PenCom) is leveraging the huge potentials in the informal sector in actualizing her plans for the sector.
To this end, Nigeria’s pension industry is set to attract additional N3 trillion when fresh contributions from the informal sector join the Contributory Pension Scheme when the country launches the micro pension’s product expected to commence in 2019.
Modalities for the successful take-off of the micro pension plan in Nigeria have been put in place.
The Federal Government, on her part, has already given approval to the Micro Pension guidelines, which according to Pencom, was communicated to them through the Secretary General of Federation (SGF) recently.
These developments have been confirmed by the Acting Director General, National Pension Commission (PenCom), Mrs. Aisha Umar-Danir in her welcome remark at the 6th Conference for Director of Pension Operators in Lagos recently.
Speaking further on this at the 2018 Media Retreat organised by Pension Fund Operators Association of Nigeria (PenOp) for Insurance and Pension Correspondents in Lagos, Head, Research & Corporate Strategy, PenCom, Dr. Farouk Aminu, said, with this approval, the commission is working on ensuring that the scheme commence in January, 2019 as plan.
He said the commission is currently working on the ICT infrastructure to support the implementation and to ensure effective take off of the plan which he added would engender the growth of the sector.
He further confirmed that the micro pension will be voluntary and there will be a lot of flexibility in the plan to allow it to work, stressing that the contributor will decide whether to be contributing daily, weekly, monthly or quarterly.
The contributor will also have access to 40 per cent of his contributions, while 60 per cent will be locked in as Pension, and can only be withdrawn when the contributor retires.
He assured that there will be no bottleneck in collecting the money when the retiree wants it, because PFAs will handle all approvals unlike the normal one that all approvals will come from PenCom..
Executive Secretary, PenOp, Ms. Susan Oranye, while speaking at the event said though the pension funds has grown to N8.2 trillion and the number of contributors has risen to about 8 million, the huge population of 160 million shows that a lot of potential exist in the pension industry.
The micro pension scheme, she said, will explore the potentials in the pension industry by persuading players in the informal sector to join the Contributory Pension Scheme (CPS) through the micro pension plan. When more people subscribe to the plan, she said, it will increase the pension assets, hence, allowing pension fund operators to invest more funds for economic growth and development.
Head, Corporate Communications, PenCom, Peter Aghahowa, in his contribution said, with what is in the guidelines, the micro pension scheme will be made flexible for people to easily join, while the method of contribution is decided by the contributors, who will choose which plan is suitable for them whether to contribute daily, weekly, monthly or quarterly.
On the age, he said, anybody who is 16 years and above is eligible to join this scheme with permission of a guardian, explaining that the regulator and operators are jointly working on the other infrastructures such as ICT to ensure a seamless operation of the plan.
PenCom, had earlier said, the scheme, if it finally takes off, has the potential to generate about N3 trillion to the pension assets, while it intends to mobilise about 12 million contributors within five years.
Micro Pension plan, according to PenCom, is expected to capture self-employed people, especially those with irregular income, usually in the informal sector and are largely financially uninformed with limited or no access to financial services especially pension plan.
Section 2(3) of the Pension Reform Act, 2014 legal framework extends the coverage of the Contributory Pension Scheme to self-employed persons through micro pension scheme.
PenComs, Acting Director-General, Mrs. Aisha Dahir-Umar, stated that the implementation of the Micro Pension Plan, is expected to improve the standard of living of the informal sector participants at retirement and reduce dependence on extended family for support at retirement.
In her welcome address at the 6th Conference for Directors of Pension Operators which held in Lagos recently, confirmed that the micro pension plan will commence in Nigeria latest first quarter 2019 even as she harped on the potentials inherent in the informal sector which she said if fully captured will expand the growth of the industry as well as reduce the high rate of poverty among Nigerians. .
To this end, she said the Commission is finalizing arrangement for the introduction of Micro pension plan which she said will commence latest first quarter of 2019.
“In the social sphere, the Commission is finalizing arrangements for the introduction of the Micro Pension Plan, which seeks to extend the benefits of the Contributory Pension Scheme to the informal sector. We hope to achieve this latest by the first quarter of 2019 and we believe that the product would be part of the efforts towards ensuring in the long term, the sustainability of the Federal Government’s social empowerment programme,” he added.
PenOp President, Ronke Adediji, while speaking on the topic, “Exploring the Micro Pension Concept.” at the 3rd Annual Conference of the National Association of Insurance and Pension Correspondents (NAIPCO) in Lagos recently, noted the potential inherent in the informal sector.
Informal Sector, according to her, plays significance role in Micro Pension as it generates jobs, amplifies entrepreneurial undertaking, reduces unemployment and underemployment, alleviates poverty and promotes economic growth.
Micro Pension is an arrangement for the provision of Pension and Retirement Benefits to the low income, self-employed and persons operating in the informal sector. It is a protection against the vagaries and unpredictability of old-age poverty..
To encourage contributions to the micro pension plan by the target audience according to her, needs flexibility of contribution amounts; access to contributions/saving; incentives for participants; financial/pension education; coverage of a high proportion of the population.
Others are availability of infrastructure that is supportive of mass registration; contribution collection and database management flexibility as well as easy and straightforward access to benefits.
PenOp boss listed creation of awareness, provision of incentives to participants, encouraging the contribution of small frequent amounts, flexible contribution rates, convenient door to door collection of contributions, and insulation of the participants against volatility in investment growth and leveraging technology to facilitate easy contribution/payments as key strategies to encourage engagement in micro-pension plans.
Others, according to her, include allowing opt outs during periods when participants are not able to contribute, ensure inexpensive portability, financial education, compulsory participation, centralized administration to lower administrative costs, professional management of funds, seamless and straightforward access to benefits.
She said micro pension is a key policy issue in developing countries and it should be considered imperative in Nigeria, adding that “Over 90% of the population in Sub Saharan Africa and South Asia are not covered by any pension arrangement due to general unemployment, low incomes, poor saving culture and above all pension arrangements that only favor workers in the formal sector”.
She called on full implementation of micro pension in Nigeria, as according to her, will boost the economy and reduce the level of poverty associated with informal sector and old age.
