After more than five years of trying to capture the informal sector under the Contributory Pension Scheme (CPS) with the Micro Pension Plan, the National Pension Commission seems to have gotten it right.
This is because President, Muhammadu Buhari will be launching the plan tomorrow, Thursday, March 28.
Micro pension is set to include the self-employed and persons working in organisations with less than three employees, in line with the provisions of Section 2 (3) of the Pension Reform Act (PRA) 2014.
It is also expected that the plan would expand the coverage of pension contributors by an estimated 30 million people by the year 2024.
This category of workers constitutes a large percentage of the working population in the country. Under this initiative, the Commission categorised the informal sector into three including, the low-income earners, the high-income earners and the Small & Medium Scale Enterprises (SMEs).
Besides, the plan aims at ensuring that the informal sector participants save towards their old age.
The Acting Director-General, PenCom, Mrs Aisha Dahir-Umar, in an interview with reporters, said the introduction of the scheme aims to provide pensions for Nigerians in the informal sector, not covered under the CPS.
She said: “It will expand the scope of coverage of the CPS, increase financial inclusion, create additional membership/contributor in the CPS and increase the pool of pension funds, available for investment and economic development.
“It is worth noting that the micro pension initiative of the Commission started in accordance with Section 2(3) of the Pension Reform Act, 2014, which provides that employees of organisations with less than three employees as well as self-employed persons shall be entitled to participate under the scheme in accordance with the guidelines issued by the Commission.
“This gave rise to the creation of the MPP with the attendant formulation and development of the Framework and Guidelines for the plan. The guidelines have been approved by the Federal Government and issued to the Operators. The guidelines have also been hosted on the Commission’s website for public use.
The department has been involved in reaching out to prospective stakeholders as well as collaborating with relevant institutions to create awareness about the plan.
Enlightenment materials on the plan are being put together by the Commission, and both the Commission and the operators are working on payment platform for flexible contributions and withdrawals on the plan.
“Due to the peculiarities of the informal sector, the Micro Pension Plan would be flexible, safe, convenient and simple. Over time, old age poverty will decrease with the introduction of the Micro Pension Plan because the informal sector worker would have saved for retirement while active.
The additional savings from Micro Pension Plan would aid economic development and macro-economic stability through investment in infrastructure and financial markets.
It will enhance pension coverage and improve Gross Domestic Product, and ensure financial security for the family as contributions will pass to the next of kin in case of contributor’s death.
“Despite the benefits of the plan, there are a few envisaged challenges that may hinder the smooth implementation of the Micro Pension Plan in Nigeria.
For instance, some of the low-income earners, who constitute the third segment of the informal sector are mostly illiterate and thus, inexperienced with formal financial transactions and institutions.
Unlike the high-income earners that can deposit in a lump sum, lower-income earners are daily wage workers and as such are unable to deposit large amounts.
“The Commission expects that the implementation of the Micro Pension Plan will yield positive results for Nigerians and the Nigerian Pension Industry.
There is, however, the need to create more awareness about the plan. 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.”
The Head of Corporate Communications, Peter Aghahowa, on his part explained that the commission conceived the micro pension idea since 2010.
He noted that the commission carried out several studies, while there were also delegations outside the country among others.This, he said, gave the commission the justification to include it in the repealed pension law in 2014.
He stressed that it was after it was included in 2014, that the intensity of work began.