Pension: BPSR advocates regulatory policy to avert poverty after retirement

The Director-General of the Bureau of Public Service Reforms (BPSR), Mr. Dasuki Ibrahim Arabi, has warned that without an urgent and effective policy, regulatory and business response to broad-based pension exclusion, poverty among the future elderly persons, who are presently working in the formal sector, will emerge as the dominant cause of increased global poverty.

He disclosed that only about 10.5 percent of Nigerian workforce are formally employed and covered by the Contributory Pension Scheme (CPS), saying: “As a result of mass-scale pension exclusion, rapid life expectancy improvements, negligible life-time savings and a breakdown of the traditional joint family system, most of these workers face the grim prospect of living the last two decades of their lives in extreme poverty.”

He spoke at the Auditorium of the Federal Ministry of Finance, where the October edition of the Bureau’s “Lunch-Time Reform Seminar” with the theme: “The imperative of Micro Pension Plan to both the formal and informal Sectors,” was held in Abuja.

Arabi, who noted that the Presidency, through the National Pension Commission (PenCom), as the apex body of the country’s pension industry, launched the Micro Pension Plan (MPP), said the MPP allows employees of organisation with less than three staff to be enrolled in its.

This, he said, is in a bid to achieve the pension industry strategic objective of covering 30% of the working population in Nigeria, under the CPS by the end of 2024.

The BPSR Director General, added that PenCom also allows self-employed individuals to participate in the CPS, as this category of workers constitute the larger percentage of the working population.

“Over the years, mandatory coverage of the Contributory Pension Scheme under PenCom’s supervision had grown astronomically and the Formal Sector subscribers as well as the scheme has achieved a long-term retirement savings amount.

“Despite this impressive progress, the self-employed non-salaried workers, including farmers, artisans, self-employed professionals, street vendors, domestic help and workers in Micro, Small and Medium Enterprises (MSMEs) continue to be excluded from the CPS and hence continue to face a significant longevity risk,” he said.

Arabi, while speaking further, said the need for urgent policy and regulatory intervention on bridging Nigeria’s pension coverage gap is also evident from Nigeria’s demographic trends, noting that a largely young excluded workforce and a rapidly growing population of the elderly presents the government with both a challenge and an opportunity.

He said: “On the other hand, collaborative and well-coordinated actions on pension inclusion could have an equally significant impact on the ability of every citizens to lead a financially secure and dignified retirement.

“By establishing a secure, convenient and affordable micro-pension program based on individual contributions and by encouraging thrift and self-help by the presently excluded workers, PenCom could effectively help mitigate the longevity risk of most of its present young citizens.

“In doing so, Nigeria would simultaneously achieve a huge pool of new, long-term household savings that could in turn fuel economic growth, employment and infrastructure development.”

According to the DG of BPSR, low public awareness and negative perceptions about pension products; potentially high front-end capital investments in technology by PFAs in establishing efficient micro-pension administration and delivery platforms, absence of incentives for voluntary participation and persistency, potentially low irregular contributions, commercial viability challenges with the micro-pension business, and the possession of the National Identity Number (NIN) as one of the condition for enrolment into the Scheme, are some of the challenges raised by stakeholders in the pension industry.

“Nonetheless, given the size of the excluded workforce, the large concealed demand for retirement and insurance products, the ongoing increase in access and utilization of formal financial inclusion infrastructure, a deep regulatory and policy commitment to pension inclusion and the potential business of a broad-based pension sector, Nigeria is well placed to achieve meaningful micro-pension coverage in the near future,” he maintained.

In a power-point presentation on MPP, Dr. Farouq Aminu, disclosed that pension fund and asset under management as at 30 September, 2019 was N9.58 trillion. He said the number of registered contributors under the CPS as at 31 March 2019 was 8.57 million, which is equivalent to 13.14% of the working population of about 65.22 million.

Dr. Aminu, Head, Investment Supervision Department at PenCom, said according to a 2014 survey, 44.5 million adults are working in the informal sector, adding that most receive income from their own businesses, and also earn income daily or weekly, although 12.6% earn money at irregular intervals.

He said: “The most recent survey by EFInA, in December 2018, indicated that 16.7 million adults in the informal sector are making regular savings/contributions for retirement. More than half of informal sector workers use some formal financial services. 44.4% of informal sector workers are banked. 65.5% of informal sector workers, or 29.1 million informal sector workers, have saved money in the past 12 months.”

The NPC senior staff, said as part of developing MPP in Nigeria, they have embarked on several awareness and sensitization campaigns through the engagement of various Trade unions and associations in the textile and garment, entertainment, transport, and automobile industry, among others.

By PRNigeria