How micro pension will guarantee retirement for artisans

Before the introduction of the Contributory Pension Scheme (CPS) into Nigeria, it was impossible to consider retirement benefits for artisans. Artisans, who are self- employed, operate in the informal sector of the economy without any hope of financial security at old age. The National Bureau of Statistics (NBS) estimated that the informal sector of the […]

Before the introduction of the Contributory Pension Scheme (CPS) into Nigeria, it was impossible to consider retirement benefits for artisans.

Artisans, who are self- employed, operate in the informal sector of the economy without any hope of financial security at old age.

The National Bureau of Statistics (NBS) estimated that the informal sector of the economy accommodates 70 per cent of the nation’s working population.

Over the years, this sector of the economy, with its attendant low-income earning status, had been without any plan for people who operate there.

Worst affected have been tailors, mechanics, carpenters, painters, farmers, petty traders and other small firm owners.

At the introduction of CPS, the emphasis had been on government employees and the organised private sector, leaving out artisans with their bleak old age outlook.

The success of the CPS, even as limited to government and organised private sector employees, had been tremendous. 

Pension assets transited from billions of deficits to N6.1 trillion as at December 2016 belonging to 7.3 million contributors.

As successful as this may appear, only 10.58 per cent of Nigeria’s working population have been covered under the scheme and the pension assets in Nigeria are far behind those of South Africa and Kenya.

The Chairman of the Board of Legacy Pension Managers Limited, Lamis Dikko, recently revealed that the ratio of pension assets in Nigeria to GDP stood at 6 per cent as at December 2016 compared to South Africa and Kenya which stood at 52 per cent and 14 per cent respectively.

To change this narrative, the National Pension Commission (PenCom) is rolling out Micro Pension Plan (MPP) to guarantee financial security for informal sector players as well as boost Nigeria’s pension assets to over N20 trillion by 2020. 

The Pension Reform Act (PRA) 2014 expanded coverage of the Contributory Pension Scheme (CPS) to the self-employed and persons working in organisations with less than three employees.

PenCom said this category of workers constitute the larger percentage of the working population in Nigeria. 

Considering the potential to grow pension assets in Nigeria, PenCom wants to cover 30 per cent of the working population under the CPS by 2024.

To achieve this, the Commission has deemed it fit to cater to pension needs of small and medium enterprises (SMEs) and smaller firms.

PenCom has repeatedly urged entrepreneurs to key into this initiative, adding that the informal sector was segmented into three categories: the low income earners, high income earners and the SMEs.

Each of these categories has appropriate pension products and sensitisation programmes that meet their peculiarities under the MPP.

The scheme is available through the Retirement Savings Account (RSAs) method. With the advancement of technology, special mobile phone applications have been implemented in some aspect of the financial transactions to make contributions easier.

Although it is yet to be adopted widely, however its full adoption will ensure that Nigerians who are self-employed or working in minute organisations have financial back-up when they are due for retirement. Experts say it is one of the best saving culture model for people who earn a living on their own.