By Rosemary Iwunze
There are indications that Nigeria’s micro pension scheme, MPS, is underperforming significantly with the target enrollments completely off plan.
The scheme, one of the most strategic financial inclusion measures of the federal government packaged and implemented by the National Pension Commission, PenCom, had envisaged to enroll about nine million registrants by end of this year, but going by mid-year figures of 99,192 the performance is around 1.1 percent.
The MPS is designed to bring the self employed members of the public into the pension system with a view to safeguarding them from retirement age poverty.
Available record at the Pencom indicates that growth rate had averaged 19.5 percent since inception in 2019 with 2023 quarterly growth at less than 5.4 percent.
Though registration had recorded impressive start with its first full year figures at 62,464 in 2020, the growth rate was less impressive in 2021 with just additional 11,227 and another small addition of 15,636 in 2022.
In 2023 the performance became drastically abysmal sustaining the massive decline which started in the second half of 2022.
The first quarter 2023 registrations recorded 4.4 percent growth to 93,225 from 89,327 recorded in the preceding quarter (Q4’22) while second quarter 2023 (Q2’23) recorded just 6.4 percent growth to 99,192 registrants.
In Q4’22, MPS registrations rose by 5.6 per cent to 89,327 from 84,612 registration recorded in Q3’22.
Section 2(3) of the Pension Reform Act, 2014 extended the coverage of the Contributory Pension Scheme (CPS) to self-employed persons through micro pension scheme (MPS).
The MPS is a pension plan for 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.
The scheme is an arrangement under the Contributory Pension Scheme, CPS, that allows the self-employed and persons working in organisations with less than three employees to make financial contributions towards the provision of pension at their retirement or incapacitation.
The informal sector includes casual day labourers, domestic workers, industrial outworkers, undeclared workers, and part-time or temporary workers without secure contracts, worker benefits or social protection.
According to the Director-General, PenCom, Mrs. Aisha Dahir-Umar, “the implementation of the micro pension plan will improve the standard of living of the informal sector participants at retirement and reduce dependence on extended family for support at retirement”.
She noted that the self-employed people and workers in the informal sector could reap financial and economic protection by participating in the plan, as the initiative will provide income at old age and inculcate a savings culture through highly protected and regulated investment.
The micro pension initiative is made flexible for people to easily join, while the method of contribution is decided by the contributors, who are to choose whether to contribute daily, weekly, monthly, quarterly, and so on.
With the scheme recording poor registration, stakeholders are of the opinion that more still needs to be done to realize the laudable objectives.
They also believe the initial target of nine million set by PenComm was moderate considering the estimated 75 million Nigerians in the self or informal employment.
The situation is now worsened by the actual enrollment figures at less than two percent of the moderate target.
It is against this backdrop that some stakeholders have challenged pension fund operators to be more creative in the product designs.
They argue that pension operators should introduce products which hold multiple benefits to serve as an anchor in attracting more into embracing the scheme.
Experts have cautioned that the era of one size fits all in consumer engagement for such informal sector workers is gone.
They maintained that pension operators must be more ingenious in their product designs especially with the current economic hardship which has forced most consumers to be more discerning seeking for more value for every spending or investment.
Managing Director of Achor Actuarial Services, Mr. Pius Apere, said that recruitment of more Nigerians especially those in the informal sector into the pension basket represents a sure way of including more Nigerians into the financial systems in view of the multiplier effects of the micro pension scheme.
Apere said: “An average Nigerian must have one form of pension scheme or the order; formal or informal and the micro pension plan can help us to include more Nigerians in the financial safety net. Micro pension can be made a big deal in Nigeria”.
Also speaking, Managing Director of Boff Insurance Brokers, Mr. Olumide Fatogun, stated that pension fund operators must be more creative in the area of product designs as to introduce products which holds multiple benefits to serve as an anchor in attracting more into embracing the scheme.
He stated: “The era of one size fits all in consumer engagement is gone, thus operators should be more ingenious in their product designs.
“We have to sufficiently target specific segments of the society with varying needs meaning that operators must remain innovative and creative with service and products.
We need to rethink our old ways”.
Meanwhile, Mr. Dauda Ahmed of the Micro Pension Department of PenCom, said that efforts are been made to institutionalize some incentives that will help in attracting more of the informal sector to embrace the micro pension project which sole aim is to ensure that those in the informal sector have pension arrangements to cater for their old age as opposed to the current situation where the elderly do not have any form of retirement scheme except for those who retire from the formal sector.
To encourage new entrants he said that operators must device means of overcoming the issues of low level of awareness, poor remittances and the absence of innovation in product and service designs.
Source: Vanguard