Some pension industry stakeholders have called on Pension Fund Administrators (PFAs) to adopt new strategies to deepen Micro-Pension Plan (MPP) awareness to attract more Nigerians into the scheme.
MPP, in line with the guided provision of PRA 2014, the National Pension Commission (PenCom), was intro¬duced with the objective of boarding pension coverage to include workers in the informal sector. Under the MPP, private sector organisations with less than three employees and self-em¬ployed individuals in the economy, who comprise over 87.9 per cent of working-class citizens, can participate in the contribution pension scheme (CPS).
The stakeholders are concerned about the slow pace at which the scheme is going, since launched in 2019 by the immediate past president, Muhammadu Buhari. They said only 105,455 contributors have so far subscribed to the scheme and contributed N435.61 million in five years, representing an average contribution of N108.9 million yearly.
Speaking on this development, Managing Director, IEI Anchor Pension, Glory Etaduovie, urged pension managers to craft a new strategy to drive acceptance of MPP among Nigerians, as a channel that can be applied to also drive financial inclusion.
Head, Surveillance Department, at the National Pension Commission (PenCom), Ehimeme Ohioma, recently revealed that the total contingent withdrawal by MPP contributors amounted to N30.3 million while there was an increase in the conversion from the informal sector to the formal sector, amounting to N6.5 million, involving 587 Retirement Savings Account (RSA) holders.
Despite the slow pace with which the plan is running, the commission is hopeful that the initiative will contribute to economic growth by offering a reliable income source for pensioners and reduce dependence on others in old age, thereby lowering poverty rates as the objective of the scheme is to cultivate a savings culture among low-income earners and self-employed individuals.
Explaining some of the problems preventing the scheme from rapid growth, Head of the Micro Pensions Department, Dauda Ahmed, said several implementation challenges faced include poor awareness, mistrust, insufficient incentives, low financial literacy, inadequate service delivery, poverty, slow adaptation of the scheme, issues relating to benefits payout, the need to simplify document requirements during registration and inflation.
Former Managing Director and Chief Executive Officer, Oak Pensions Limited, Samuel Inyang, likened the slow pace of micro pension penetration to current economic challenges, as Nigerians are struggling to survive because of the high cost of food. He added that the economy has worsened in the last few years and most of those the scheme was meant to bring in cannot even feed. “It is only in a thriving economy that people can effectively save money,” he noted. He argued that there are no sufficient incentives to patronise the scheme from both the regulators and operators, saying the return on investment (RoI) is way below inflation rates, with no added value to those savings.
According to him, there is little or no flexibility in the scheme, citing his experience while he was active in the industry, when a Nollywood actress queried why she should save her money in the scheme when if she needed to use it, there would be restrictions. “Despite all attempts to convince her, she insisted that she would rather invest in property than in a micro pension.”
He called on the regulators to be more flexible in their approach and copy the model operated in Ghana that has lots of flexibility by both regulators and operators. ‘Savers should be allowed to withdraw as much as they want and once confidence is built, the Fund will do better in no time.”
Industry expert, Usman Suleiman, said the surest way to rescue the scheme and stand a chance of realising the expectations of the government, is for the industry to invest massively in repackaging, publicising, promoting and selling it.
He stressed that the informal and micro-operators are presently in great need of resource conservation and to enable them to voluntarily partake, such a scheme will have to be worth investing in. He added that the operators are not unmindful of the fact that the scheme has not made the desired impact since its inception and are working to engage the government to be part of it by also adding to what individual contribution is, as an incentive.
Chief Executive Officer, the Pension Funds Operators Association of Nigeria (PenOp), Aguche Aguda, urged the government to support the scheme for expectations to be met. According to him, in countries where micro pensions have grown well, there is also government backing where governments add to individual contributions.
“In countries like Rwanda and Kenya, their governments add to what individuals contribute. If an individual contributes 10,000, the government would also mark it up with N10,000. So, here in Nigeria, we are trying to engage the government for support.”
