Including informal sector workers in the Contributory Pension Scheme (CPS) suffers more delay, as the set January date elapses. Sunday Ojeme reports
Over 11 years after the inauguration of the new pension plan, workers in the informal sector may have to wait a bit longer before keying into the scheme, as the Federal Government is again missing the 2019 first quarter target set for micro-pension implementation. Anticipating that the implementation of the scheme would effectively commence by January 1 this year, the National Pension Commission (PenCom) had hurriedly put all the modalities in place including a comprehensive guideline to for the process. However, three months into the year, everything appears to be slowing down again, as the relevant authorities has failed to kick off the process as earlier planned. Findings by New Telegraph, however, revealed that while the commission is fully set for the planned implementation, the Federal Government, precisely the Ministry of Finance, is yet to give the go ahead. The micro-pension arrangement is being worked out to integrate workers in the informal sector of the economy into the Contributory Pension Scheme (CPS). To arrive at its current position, the commission had organise sensitisation workshops and enlightenment programmes on CPS for informal sector associations and unions as part of the strategy of driving pension coverage in the sector. It also had meetings with Medium Enterprises Development Agency of Nigeria (SMEDAN) where an agreement was reached to set up a joint Technical Committee that would work towards the effective implementation of the micro-pension plan. Section 2(3) of the Pension Reform Act, 2014 extends coverage of the CPS to self-employed persons through micro pension scheme.
With all the modalities put in place, the last phase of the scheme, which had to do with release of the guidelines, was effected a few months ago after the Federal Government gave the commission the go ahead to develop the scheme. The Head, Research & Corporate Strategy, PenCom, Dr. Farouk Aminu, had said the commission was working on ensuring that the scheme commenced last January, noting that it was a development that could enhance the growth of pension assets in the country. Aminu said then that the commission was also working on the ICT infrastructure to support the implementation and to ensure effective take off of the plan. Unlike the one that is currently running, the micro pension will be voluntary with a lot of flexibility in the plan to allow it to work. The contributor will decide whether to be contributing daily, weekly, monthly or quarterly, and will also have access to 40 per cent of his contributions, while 60 per cent will be locked in as pension, and can only be withdrawn when the contributor retires. PenCom had earlier projected that the scheme had the potential to generate about N3 trillion to the pension assets, while Pen- Com intends to mobilise about 12 million contributors within five years.
The Acting Director General of PenCom, Aisha Dahir Umar, said the commission was increasing efforts to ensure the provision of necessary infrastructure for the unveiling of the scheme, adding that the initiative was in line with the commission’s strategic objective to extend the coverage of the CPS. Micro-pensions will directly address breakdown of family support, avert old age poverty, as it engages and extends pension to the large working population that are self-employed. While conceiving the micropension idea, the commission proposed that it would boost pension contributors to 20 million from the current figure of 8.48 million contributors by 2019 and 30 million by the year 2024. Going by the data released by the National Bureau of Statistics (NBS), resources in the informal economy amounted to N39.0 trillion in 2015, representing 41.4 per cent contribution to the Gross Domestic Product (GDP). Some of those in this group now being targeted by the commission include the hordes of artisans as well as those in the burgeoning entertainment industry. This segment is estimated to be 70 per cent of the country’s population.
According to the commission, it is working assiduously to enrol 250,000 contributors within six months of the commencement of the initiative. The scheme is an offshoot of the pension industry fiveyear strategic plan to expand the coverage of the CPS to 20 million contributors by 2019. The commission is 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. “We have 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,” stated the commission. The scheme will avail the contributor access to regular stream of retirement income at old age and improved living standards for the elderly. The contributors are to benefit from the various incentives to be offered by the PFAs just as the initiative will deepen financial literacy and inclusion. PenCom also declared that as this category of workers constitutes the larger percentage of the working population in the country, there is no doubt that to achieve the pension industry’s strategic objective of covering 30 per cent of the working population in Nigeria under the CPS by the end of 2024, all efforts should be made to extend coverage to this important segment of the Nigerian economy.
Mode of contribution
As part of the arrangement, the contributors in this segment may be expected to make contributions daily, weekly, monthly or as may be convenient for them as the plan is open to individuals who are 15 years and above with legitimate source of income and resident in Nigeria. In the same vein, every contribution made shall be split into two comprising 25 per cent for contingent withdrawal and 75 per cent for retirement benefits just as the contributions shall be made by cash, electronically or any payment platform approved by the Central Bank of Nigeria (CBN). PenCom maintained that contributors shall be eligible to access the portion of their contributions available for withdrawal one month after making the initial contribution, stressing that contingent withdrawal can be made anytime. A contributor may withdraw the total balance of the contingent portion of his/her Retirement Saving Account (RSA) including all accrued investment income thereto, and that payment of contingent withdrawal shall not exceed two working days. The regulator noted that a contributor shall be eligible to access pension upon attaining the age of 50 years or on health ground in accordance with the law, adding that a contributor shall also be entitled to guaranteed minimum pension, provide they satisfy the provision of Section 84 (1) of the Pension Reform Act (PRA) 2014.
Highlighting some of the likely challenges of the scheme, Mr. Eric Fajemisi, Stanbic of IBTC Pension Managers Limited, said, though micro-pension scheme is good for the country, it, however, has its own challenges, which include insufficient awareness and negative perception towards it, modest financial literacy in the country, high cost of promoting awareness on the CPS, lack of reliable data on the informal sector and low buy-in by unions in the pension sector, among others. These challenges, he noted, must be addressed prior to commencement of the scheme and thereafter. He, however, believes that, when finalised, the scheme will ensure improved standard of living for the elderly, guarantee the safety of funds and may provide access to other incentives, such as mortgage facilities and health insurance. According to him, other benefits include flexible contribution remittances, the opportunity to make withdrawal prior to retirement and the enhancement of financial inclusion and attainment of economic stability objectives. He described the proposed micro pension scheme as having the capacity to deepen asset accumulation in Nigeria, which will also provide the vital capital required for investment in critical sectors of the economy. According to Dahir-Umar, 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.
As informal sector workers eagerly await the implementation of the scheme, it is also expedient for the Federal Government to formally launch the process, especially now that the industry regulator had done everything within its powers to guarantee the smooth take-off of the plan. This has become very urgent in the sense that apart from driving Federal Government’s financial inclusion programme, it will also give those targeted a sense of belonging as well as boosting the nation’s Gross Domestic Product (GDP).
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