Since President Muhammadu Buhari launched the Micro Pension Plan in 2019, a total of 72,846 contributors have been registered by pension fund administrators, giving workers in the informal sector of the economy hope, Ebere Njoji writing
On March 27, 2019, President Muhammadu Buhari officially launched the Micro Pension Plan (MPP) as part of his administration’s efforts to ensure that Nigerians who have worked hard during their active years in the service of their motherland live in dignity and retire without any cause for alarm. .
The MPP was initiated by the National Pensions Commission (PenCom) and was designed to include workers in the informal sector of the economy as well.
Since the launch of the scheme by Buhari, a total of 72,846 contributors have been registered by pension fund administrators (PFA).
The micro-pension scheme targets the vast majority of Nigeria’s working population who, incidentally, operate in the informal sector of the economy.
At the launch, Buhari said the scheme was part of his administration’s efforts to ensure that Nigerians who have worked hard during their active years in the service of their motherland live in dignity and retire without any cause for alarm. .
He said the federal government understood the importance of the pensions industry, adding that was why the micro-pension scheme was designed to give informal sector operators something to fall back on when would retire from active duty.
The president added that his administration had, over the past three years, provided grants, technical support and loans to small businesses, resulting in positive changes in their way of life.
The President further indicated that as part of the government’s support for the successful implementation of the initiative, the Financial System Strategy 2020 should be designed to support the micro-pension scheme through its financial inclusion.
According to a report published by the World Bank, 80.4% of Nigerian employees worked in the informal sector, 10% in the formal sector and 9.6% in households.
The World Bank report indicated that 78.8% of men worked in the informal sector; 12.9% of men were in the formal sector and 8.3% in households.
In Nigeria, informal sector workers include market women, members of road transport workers, textile, garment and tailoring associations, tricycle operators and commercial motorcycle riders associations, associations of butchers, workers in the film and performing arts industry, mechanics and workers in the automobile industry as well as single professionals such as lawyers and accountants, among others.
Previously, these categories of workers and organizations employing less than three employees were not covered by the contributory pension scheme and, as such, were not necessarily covered by any pension scheme.
But with the amended Pension Reform Act 2014, section 2(3) now provides that employees of organizations with less than three employees, the self-employed and people operating in the informal sector can participate in the pension scheme. contributory pension under the Micro-Retirement Scheme.
Over the past three years, the government has provided grants, technical support and loans to small businesses, resulting in positive changes in their way of life.
These federal government interventions and the need for financial inclusion are some of the reasons the Micro Pension Plan was designed to provide informal sector operators with a way to fall back when they retire from active service.
According to the Micro Pension Plan, anyone in the above-mentioned category who wishes to participate in the MPP must register with any licensed pension fund administrator (PFA) of their choice.
Registration consists of opening a Retirement Savings Account (RSA) by completing a registration form. Once the RSA is opened, the Micro Pension Contributor (MPC) is assigned a Personal Identification Number (PIN) by the PFA.
The plan allows a micro-pension contributor to make contributions on a daily, weekly or monthly basis, whichever is most convenient. These contributions can be made by cash deposit, electronically, through any payment platform or financial services agents approved by the Central Bank of Nigeria (CBN).
Micro-pension contributions are invested by PFAs in safe investment outlets regulated by the National Pensions Commission (PenCom). Therefore, savings are expected to increase over time due to investment returns.
The scheme also allows each contribution made by the contributor to the micro-pension to be split in half, ie 40% for conditional withdrawal and 60% for retirement benefits.
The contributor will be able to access the conditional part of the contribution three months after making the initial contribution. Thereafter, a Contingent Withdrawal can be made once a week on the balance of the contingent part of the RSA.
The MPC can also choose to convert any part of the contributions into a retirement share at the end of each year, and can also transfer its retirement savings account from one PFA to another in accordance with the transfer rules of the RSA.
In addition, contributors to the micro-pension scheme will be able to access their retirement and end-of-career benefits at age 50, upon retirement and/or for health reasons. Additionally, upon retirement, the MPC has the option to transfer some or all of its outstanding balance on the conditional portion to its portion of the retirement benefits.
After securing employment in the formal sector with any organization that has three or more employees, the micro-pension contributor will be eligible to participate in the mandatory CPS. However, once the Micro Pension Contributor has joined the mandatory CPS, they cannot convert back to the Micro Pension Plan.
The MPP implementation framework issued by PenCom took into account the non-homogeneous nature of informal sector actors with regard to income regularity. Therefore, under the MPP, there are no fixed amounts for periodic contributions, allowing participants to contribute each time they earn income. There is also no specified amount for contributions. They can be daily, weekly or monthly but should be done at least once a year.
Additionally, given the circumstances of most potential MPP participants, the need to step aside to deal with urgent financial contingencies has been recognized. Therefore, RPM contributions are divided into 40% and 60% respectively for conditional withdrawals and pensions.
These specificities of the MPP such as the flexibility of contributions and access to part of the funds of the Retirement Savings Account (RSA) of members before retirement aim to circumvent the constraints of the mandatory CPS and thus to promote participation. at MPP.
In its unwavering commitment to the success of the MPP, PenCom recognizes the importance of sustained illumination in building stakeholder confidence.
Ultimately, this would lead to the achievement of the goals of the Micro Pension Plan, which include reducing old-age poverty and improving financial inclusion in Nigeria.
As part of the government’s support for the successful implementation of the initiative, the Financial System Strategy 2020 has been designed to support the micro-pension scheme through its financial inclusion programs.
PenCom chief executive Aisha Dahir-Umar explained that under the plan, contributors could withdraw their 40% contribution three months after making the initial deposit, while the 60% balance was only accessible. at the age of 50 during retirement.
According to her, the implementation of the plan will, among other things, reduce poverty among the elderly by 85%.
She said, “The product also aligns well with current federal government social empowerment programs as it seeks to ensure, over the long term, the sustainability of empowerment program benefits for participants, who can seize this opportunity to save. for their old age.
“Our goal is to ensure efficiency and effectiveness in service delivery as well as transparency and accountability in the administration of the product by registered pension plan operators.
“With the official launch and subsequent successful implementation, the Micro Pension Plan is expected to significantly expand pension coverage to more Nigerians and generate more long-term incremental funds for Nigeria’s economic development.
“The commission would work with relevant stakeholders to educate and enlighten target participants and the public on the features and benefits of the micro pension scheme.”