Informal sector practitioners have been urged to tap into the many opportunities in the National Pension Commission’s (PenCom) Micro Pension Plan (MPP).
The call was made following the zero commitment of most employees in the informal sector to the scheme set up in 2019 to take care of their welfare after retirement from active work life.
A financial inclusion advocate, Enhancing Financial Innovation and Access (EFInA), revealed that most informal sector workers only planned to rely on their savings, children, or businesses in retirement.
Speaking during a sensitisation programme, organised by the Pension Fund Operators Association of Nigeria (PenOp) in Lagos, a Research Officer with EFInA, Chioma Nwaiwu, said while 14 per cent of adults under the age of 55 have not made financial plans for old age, only 29 per cent of adults under the age of 55 plan to rely on pension in old age.
According to her, “How will you ensure that you have money to meet your needs when you are old and cannot work?”
Identifying some of the challenges militating against the scheme, she said lack of awareness was a major barrier to the uptake and usage of micro pension.
According to her, “94 per cent of adults without pensions are unaware of the service, while 62 per cent of individuals with pensions have not heard of micro pensions –lost opportunity for testimonial marketing.
“One-third of adults who have heard of micro pensions have a pension account. Nigeria lacks a wide variety of distribution channels. For micro pension, distribution is concentrated in a handful of PFAs/PFCs, as well as agents and brokers. Mobile network operators are key distribution channels that is missing in Nigeria.”
Speaking further on the lack of understanding of the distinct features of the micro pension product, she said irregular income and not having enough money were the most frequent reasons given for not making regular retirement contributions.
“Of those not making regular retirement savings, nearly half cited irregular income as a reason. This indicates that pension products with flexible contributions and the timing could be useful in reaching those without pensions. More efforts are needed to educate the populace on the features, reliability and safety of micro pensions,” she said.
However, Director-General, PenCom, Aisha Umar-Dahir, said the micro pension scheme, unveiled in 2019 by former President Mohammadu Buhari as part of the commission’s efforts to expand pension coverage to workers in the informal sector, has climaxed to N435.61 million.
She said the theme of the event ‘Challenges,
Prospects for Growth and Deepening Financial Inclusion in Nigeria align with the commission’s resolve to expand pension coverage to all workers, especially those in the informal sector through the MPP.
Giving an update on the success of the scheme and how small businesses could leverage it, she said: “As of April 2023, the total number of registered micro pension participants stood at 95,045 with a total value of the MPP fund of N435.61 million. It is, however, clear that more needs to be done to achieve the desired outcome of extending coverage to workers in the informal sector with an estimated 50- 75 million workers.”
She cited challenges of low awareness level, limited contribution remittance channels; lack of adequate incentives to encourage participation and absence of innovation to enhance efficiency around registration, pension contribution remittances and benefit payments.
She noted that the initiative would promote economic growth, by providing a stable source of income for retirees and reduce old-age dependency, translating to a reduction in the poverty rate.
The PenCom boss added that the plan also aims to encourage a savings culture among low-income earners and self-employed individuals.
