We’re Targeting 30m Contributors By 2024 With Micro Pension – PenCom Boss
Aisha Dahir-Umar is the Acting Director General of the National Pension Commission (PenCom). In this interview with Daily Trust, Dahir-Umar says PeCom is targeting 30 million pension contributors by 2024 with the introduction of Micro Pension Plan (MPP). She says the MPP will reduce old-age dependency on extended family. The PenCom boss speaks of the benefits, challenges and expected launch of the MPP.
The Micro Pension Plan has been in the news lately, but many Nigerians still don’t know what it is all about. What does it mean?
The National Pension Commission (PenCom), in accordance with the Provisions of Section 2 (3) of the Pension Reform Act (PRA) 2014, will introduce the Micro Pension Plan. The Micro Pension Plan is set to include the self-employed and persons working in organizations with less than three employees. The Micro Pension Plan aims at ensuring that the informal sector participants save towards their old age. It is also expected that the plan would expand the coverage of pension contributors by an estimated 30 million people by the year 2024. This category of workers constitutes a large percentage of the working population in the country. To implement this initiative, the Commission segmented informal sector into three broad—the low-income earners, the high-income earners and the small & medium scale enterprises (SMEs). Each of these categories will be targeted with appropriate pension products and sensitization programmes that meet their various peculiarities. The Commission has recently exposed the draft Guidelines and Framework on Micro Pension Plan to its Stakeholders and the general public for comments and observations and is on the verge of finalizing the Guidelines and Framework. In addition to the exposed draft guidelines and framework, the Commission is working on the IT infrastructure that will support the launch of the Micro Pension Plan. The Micro Pension Plan is an arrangement for the provision of pension to the self-employed and persons operating in the informal sector. The Micro Pension Plan is also aimed at low-income earners who are often financially illiterate and usually have limited or no access to financial services. It is also the sought-after solution to old age poverty as can be found in jurisdictions like India, Kenya and Ghana who have successfully implemented a Micro Pension Plan.
Why are you introducing a micro pension plan now?
Due to the peculiarities of the informal sector, the Micro Pension Plan would be flexible, safe, convenient and simple. Over time, old age poverty will decrease with the introduction of the Micro Pension Plan because the informal sector worker would have saved for retirement while active. The additional savings from Micro Pension Plan would aid economic development and macro-economic stability through investment in infrastructure and financial markets. It will enhance pension coverage and improve Gross Domestic Product, and ensure financial security for the family as contributions will pass to the next of kin in case of contributor’s death.
How is Micro Pension Plan different from the mandatory Contributory Pension Scheme?
The mandatory pension and Micro Pension Plan are arrangements under the Contributory Pension Scheme (CPS). The only difference between the two is the nature of participation. The mandatory pension is obligatory for all eligible employees and both the employer/employee contributes towards the payment of the employee’s pension at retirement. Micro Pension on the other hand is voluntary and solely funded by the contributor.
When is PenCom likely to launch the Micro Pension Plan?
The Micro Pension Plan will be launched this month, being March, 2019.
What are the likely challenges of implementing the Plan in Nigeria?
Despite the benefits of the plan, there are a few envisaged challenges that may hinder the smooth implementation of the Micro Pension Plan in Nigeria. For instance, Some of the low-income earners, who constitute the third segment of the informal sector are mostly illiterate and thus, inexperienced with formal financial transactions and institutions. Unlike the high-income earners that can deposit in a lump sum, lower-income earners are daily wage workers and as such are unable to deposit large amounts.
How do you intend to solve the challenge?
The Commission expects that the implementation of the Micro Pension Plan will yield positive results for Nigerians and the Nigerian Pension Industry. There is, however, the need to create more awareness about the plan. 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.