Need to Boost Pensions Scheme Enrollment

Ebere Nwoji writes that the significant shortfall in the number of eligible subscribers into the Contributory Pension Scheme and Micro Pension Plan has called for the need for operators to embark on mass education and awareness creation to reverse the trend

Under subscription of Nigerian workers to the Contributory Pension Scheme (CPS) has been blamed on lack of awareness, which has culminated in low penetration of the CPS regime in Nigeria.

The CPS, which would be 18 years in few months in Nigeria (June 2004-2022) is yet to be adopted by many employers and their employees.
For instance, many state governments and their workers till date still don’t believe in the scheme.

Enrolment Statistics

Available statistics from the National Pension Commission (PenCom) estimated Nigeria’s working population at 70 million out of which, about 45 million work in the formal sector that are eligible contributors to the CPS. However, only 9.4 million have keyed into the CPS scheme, meaning that over 40 million formal sector workers are outside pension coverage.

Among the informal sector workers, most of who are eligible contributors to the micro pension scheme, recent statistics released by PenCom, said only 73 million have registered in the micro pension scheme.

Pension sector analysts said this goes to show the long gap between eligible contributors who are already captured in both the CPS and micro pension scheme and those outside the scheme.

According to them, it also shows the quantum of investible funds that supposed to be in the custody of pension fund operators, which is either lying idle out there, or is being unnecessarily squandered by the owners without considering the danger of old age poverty as a result of lack of savings culture.

The implication of this is that aside the recapitalisation of the sector from the current N1 billion to the stated N5 billion which is a major challenge facing the operators, another major challenge staring on the faces of Pension Fund Administrators (PFAs) and Pension Fund Custodians (PFCs) is education and awareness creation among Nigerians on the need to key into the Contributory Pension and Micro pension schemes.

Pension experts said this was a big challenge on the part of the operators because the present economic situation in the country has drastically eroded savings culture among Nigerians despite that old age and retirement is inevitable.
Obviously, getting more contributors into the scheme would shoot up pension assets from the current N13 trillion mark to higher figure and would provide the economy with more long term investible funds.

PenCom’s Mandate

The urgent nature of the need for the pension operators to face this education and awareness challenge prompted the sector regulator the National Pension Commission (PenCom) to state openly that the pension operators have education and awareness creation on the pension scheme as their major assignment this year.

PenCom Director General, Aisha Dahir Umar, charging the operators in this regard mandated them to have a yearly budget for media campaign plans to increase participation in the micro pension plan (MPP).

The PenCom DG stated this in a Framework for Enlightenment and Public Awareness’ for the Micro Pension Plan sent to all PFAs.

Dahir Umar, was particularly concerned about the slow growth of the micro pension scheme, regretting that two years after the launch of the plan in the country, only 73,000 contributors have been recorded out of over 200 million population Section 2(3) of the PRA 2014 stipulates that, “employees of organisations with less than three employees as well as self-employed persons shall be entitled to participate in the scheme following guidelines issued by the Commission, adding that Section 23 (f) of the PRA 2014 mandates the Commission to “carry out public awareness, enlightenment and education on the establishment, operations and management of the scheme.”

Also, sections 5.3.1(c) and 5.4.1(i) of the Guidelines for MPP 2018 stipulate that, “The Commission shall create awareness by carrying out public enlightenment and education on the establishment, operations, and management of MPP” and that PFAs shall conduct regular public awareness, enlightenment, and education on MPP.”

Experts View

Meanwhile, experts believe the under subscription into CPS scheme is as a result of lack of adequate public awareness.

“A vast majority of Nigerians including the supposedly enlightened community lack information on the workings of the contributory Pension Scheme, ” said former Managing Director, Premium Pension Limited, Mr. Wilson Ideva.

This, he said, explain why there was less than 10 per cent penetration of the market after 18 years of commencement of the scheme in Nigeria.

According to him, less than 10 million workers in Nigeria have subscribed to the pension scheme out of the estimated 70 million working population while a total of N13 trillion have been amassed as pension assets under management in the industry.
He lamented that the lukewarm attitude of many Nigerians to the pension scheme was inexplicable considering the ugly past of the defined benefit scheme, which according to him, we have all been striving to break away from.

He said, “Workers looked up to retirement with so much fear and trepidation because of the inherent uncertainties. The old scheme was fraught with corruption and bureaucratic bottlenecks that occasioned the ugly sight of long queues of aged citizens waiting to be paid pension that oftentimes never came.”

Ideva said there was need to applaud the initiators of the scheme in the country adding, “initially, when the idea was presented, a lot of people did not believe in it, but that it is understandable considering where we were coming from. He noted that such skepticism has been dissipated with the successes recorded by the Contributory pension scheme since its existence.”

He recalled the pathetic situation of pensioners before the scheme was introduced comparing it with the current situation where workers were partners in the management of their pension funds shows a big difference as he urged people to note the difference between the Contributory Pension Scheme and the old defined benefit system under which some pensioners are still depending on.

Speaking on the issue especially as it concerns micro pension scheme, Head, Micro Pension Department, PenCom, Mr Dowda Ahmed said current number of contributors into the micro pension scheme which was approximately 73,000 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, “he said.

Subscribers View

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 mainly due to ignorance and lack of awareness.

Speaking, Uche Chukwujekwu, a lawyer with his chamber in Igboelerin, ojo area of Lagos, said he hardly believes in Nigerian system anymore.
This, he stated, is because any good system that works elsewhere hardly work in NIgeria.

He said for instance, he bought a new Toyota Highlander jeep, which he took comprehensive insurance on revealing that the car was damaged by a commercial bus driver who had no Third Party Insurance cover last week.

He said he had contacted his insurer, one of the biggest insurance companies in Nigeria, who obtained all the required papers including police report but has not reply him 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.

The same thing, he said, goes to the micro pension scheme, noting that 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 foreign exchange and other forms of savings.

Asked what he thinks will happen if the foreign exchange market crashes, he said at least his capital would be intact.

But Executive Director, Centre for Human Rights Advocacy, Ivor Takor, 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.

He encouraged Nigerians to seek information on the workings of the current pension scheme in the country and key into it just as he advised the scheme operators to go into mass education.

“It is just because we don’t have saving culture. People see it as paying tax, people look at the immediate not future. PenCom needs enlightenment it is extremely important. PenOp and PenCom should not toil with enlightenment, “he advised.
He said the Micro Pension target people have relations who were victims of delayed retirement benefits payment.

He said having heard stories of these delayed payments; they would definitely be skeptical 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.

Plan by Operators

But the scheme operators are not giving up hope.

Managing Director/CEO, Access Pension Fund Custodian, Idu Okwuosa, said a committee had been set up by the Commission to commence massive campaign this year.

Okwuosa, said the Pension Operators Association were working on how to introduce incentives into the micro pension plan in particular 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 subscribers.

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

Analysts Reactions

Commenting, analysts said the operators could do better in the task of mass education and awareness creation starring on their faces by borrowing a leaf from what insurance operators did.

The analysts urged operators to embrace the idea of catching potential contributors young right from their school days.

They advised the operators to start writing books on benefits of early savings into the scheme and distributing to students in universities and other tertiary institutions most of who will be self employed after their NYSC programme and those who will be lucky to secure employment after service so that they start on time to save into the scheme having been aware of the workings.

The operators were also advised to engage agents who will carry about the good message of pension savings to boost registration and contribution into the scheme.