Pension: BPSR advocates
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.