Reversing Micro Pension Scheme Slow Growth

The slow growth rate of the micro pension scheme three years after its official launch is now worrisome to Pension stakeholders, writes Ebere Nwoji.

When the National Pension Commission (PenCom) was established five years ago, precisely in October 2016, it was announced to the media that it had set up a database as part of preparation for the take off of the micro pension scheme, the commission said it was targeting to ensure that within the first six months the scheme took off, it would register minimum of 250,000 contributors and would in first three years shoot up total pension assets from the N8 trillion level it was then to N20 trillion by the year 2019.

PenCom at that time was very optimistic about achieving this target, given the years of preparations and modalities it had put in place to ensure smooth take off of the scheme.
But five years after this projection, the commission is lamenting that it could only register approximately 73, 000 contributors within the first three years of the micro Pension launch.
President Muhammadu Buhari launched the micro Pension plan on March 29, 2019.

Since its launch, contrary to the desires and aspirations of the pension sector regulator, PenCom, the micro pension plan has witnessed slow growth.
This is in contrast to the speedy growth witnessed by the Contributory Pension Scheme (CPS) which had within 17 years of its existence registered over 10 million contributors and built up N13 trillion assets.

Section 2(3) of the Pension Reform Act, 2014 (PRA 2014) provides that employees of organisations with less than three employees as well as the self-employed persons shall be entitled to participate in the Contributory Pension Scheme in accordance with guidelines issued by the Commission.

Labor experts said these categories of persons mainly in the informal sector constitute the vast majority of the working population in Nigeria and are not covered by any retirement benefit scheme.

PenCom said it accordingly considered it necessary to develop the guidelines for the implementation of the provisions of section 2(3) through a “Micro Pension Plan”.
The commission described Micro Pension Plan as an arrangement for the provision of pensions to the self- employed and persons operating in the informal sector.

At the 2016 edition of its annual media retreat held in Calabar, Cross River State, PenCom assured the media that it had put in place adequate preparations that would enable it achieve its target in the micro pension scheme.

The them head of micro Pension department of PenCom, Mr. Polycarp Anyanwu, told the media at the retreat that already the commission had set up micro pension department made up of 23 staff, developed a micro Pension data base, and had been collaborating with potential contributors for the micro pension scheme.

He said the commission had been collaborating with chambers of commerce, as well as other government agencies in charge of small businesses such as Small and Medium Enterprise Development Authority (SMEDAN) and was working on guidelines for the commencement of the scheme.

Anyanwu, had explained that Micro Pension initiative existed for the provision of pension coverage to self-employed persons, adding that in Nigeria, it covered three strata of income earners namely lowest, middle and high income earners.

According to him, the commission was working assiduously to enroll 250,000 contributors within six months of the commencement of the initiative.
He disclosed that the commission was also targeting the self-employed in various trades and professions in Nigeria such as artisans, accountants, lawyers, mechanics, tailors, market men/women, hair dressers, architects, engineers among others.

Anyanwu maintained that the scheme was an offshoot of the Pension industry’s five-year strategic plan to expand the coverage of the CPS to 20 million contributors by 2019.
According to him, the commission had also reviewed the implementation of Micro Pension in other jurisdictions like Kenya and Ghana; formulated Guidelines and Framework on Micro Pension; consulted licensed Pension Industry Operators and enhanced its information and communications technology capacity to accommodate the scheme.

On benefits accruable, Anyanwu said it would avail the contributors’ access to regular stream of retirement income at old age and improved living standards of the elderly.

He said contributors were to benefit from the various incentives to be offered by the PFAs, adding that the initiative would deepen financial literacy and inclusion; secures financial autonomy and independence of retirees; passage of wealth to survivors in the event of death; increases National Savings and long term funds; promote growth development of the capital, mortgage and insurance markets and have positive effect on the national economy as pension assets increased.

However, in contrast to this, three years after the Micro pension scheme took off, Anyanwu’s successor, the current Head, Micro Pension Department, PenCom, Mr Dowda Ahmed, said current number of contributors into the micro pension scheme which was approximately 73000 contributors fall short of the commission’s expectation.

According to him, the commission, had expected more than what it has recorded, adding that the commission had engaged some stakeholders to ensure that the Micro Pension Plan had an enabling environment to thrive.

He described the Micro Pension Plan as a long-term voluntary financial plan for the provision of pension coverage to the self-employed and persons working under organisations with less than three employees who are mainly in the informal sector.

According to him, the commission had expected more than what it has recorded.
“Yes we are not making so much as expected, a lot of work has been going on to that effect. Our targeted media campaign is coming up, our major challenge is lack of awareness about the products itself and there is need for operators and commission to do more to create awareness.

When THISDAY contacted some self employed and Micro business operators who fall within the target market of the micro pension scheme on their status and those of their workers, their responses show that they have little or no interest in the scheme.

According to Barrister Uche Chukwujekwu, a lawyer with his chamber in Igboelerin, ojo area of Lagos, he hardly believes in Nigerian system anymore.

This, he said, is because system that works elsewhere hardly work hardly work in Nigeria.
He said for instance, he bought a new Toyota Highlander jeep, which he took comprehensive insurance on and just last week, the car was damaged by a commercial bus driver who obviously has no Third Party insurance cover.

He said he had contacted his insurer, one of the biggest insurance companies in Nigeria, had obtained all the required papers including police report but that up till now, the insurance firm had not given him any reply in terms of claims payment.

He reasoned that if he as a practicing lawyer could not easily receive claims payment on a comprehensive insurance he took on his car, he wondered what the ordinary man in the street who took similar policy would pass through before receiving his claims.
He said the same thing goes to the micro pension scheme.

He said if contributors who worked for government would retire and stay three to four years before receiving their initial lump sum payment because of non release of their accrued rights by government, a self employed person who registered into the micro pension scheme might at old age discover that there was no record of any contributions in his name in the micro pension company he has been paying money into.

He said for him, given the way things were going in Nigeria, he had decided to go into self-retirement planning through investments in forex and other forms of savings.
Asked what he thinks would happen if the forex market crashes, he said at least his capital would be intact.

But Barrister Ivor Takor, Executive Director, Centre for Human Rights Advocacy, said though he and his staff were fully into Contributory Pension Scheme, the micro pension scheme was a good opportunity for self employed persons in Nigeria to save for the future and escape old age poverty.

According to him, though many self-employed persons felt they could continue working till they die, it might not work for them because old age and its associated weaknesses must surely come at the right time.

He advised people who are into self-employment to save for the future through registering into the micro pension scheme.
On the slow growth of the number of registered contributors into the scheme Takor, said Micro pension is a voluntary scheme not a compulsory scheme.

According to him, it will take a gradual process for the number of contributors to grow.
He said the reason for this was that Nigerians didn’t have savings culture and that the target market of the micro pension scheme was people living from hand to mouth.

“They feel they can continue working till they die but it may not work that is why the scheme has not got the type of enrollment they envisaged. It is just because we don’t have savings culture people see it as paying tax people look at the immediate, not the future. PenCom need enlightenment it is extremely important. PenOp and PenCom should not toy with enlightenment”, he advised.

He said another reason the micro pension scheme was recording slow growth was because during the last two years, accrued rights were not coming as and when due and as a result payment of retirement benefits to pensioners were delayed.
He said the Micro Pension target people who have relations who were victims of delayed retirement benefits payment.

He said having heard stories of these delayed payment; they would definitely be sceptical about registering into the scheme. So they will be afraid to key into the micro pension scheme. Then pandemic affected the way people make income, but with serious enlightenment, with payment of accrued right, it will give a new phase to the Contributory Pension Scheme and to Micro Pension as well.

But the scheme operators are not giving up hope. Ahmed on the way forward, said micro pension stakeholders have been engaged to make sure we have enabling environment for success.

According to him, come next year, there will be a lot of activities to ensure we drive the Micro Pension plan.
Managing Director/CEO, Access Pension Fund Custodian, Idu Okwuosa, said that a committee had been set up by the Commission to commence massive campaign next year.
Okwuosa, said the Pension Operators Association were working on how to introduce incentives into the micro pension plan as value addition to contributors.

She said the operators had reached out to some financial service providers, especially insurers to work out measures for adoption of products such as health insurance, term life assurance, loss of job policy amongst others as incentives for their micro pension contributors to improve on the lives and fortune of micro pension subscribers.

According to her, PenOp and the National Pension Commission (PenCom) desire a better lifestyle for micro pension contributors and are working to see that aside the benefits of retirement and contingency savings, contributors maximise other robust incentives.