Nigeria’s pension industry is set to attract fresh contributions from the informal sector, which is expected to hit N3 trillion, when the country launches the micro pensions product.
Oriental News Nigeria reports that the Federal Government has already given approval to the Micro Pension guidelines, which is expected to takeoff by January 2019.
The approval, it was learnt, was communicated to the National Pension Communication (PenCom) through the Secretary General of Federation (SGF) on Wednesday.
Confirming the development at the 2018 Media Retreat organised by Pension Fund Operators Association of Nigeria (PenOp) for Pension Correspondents in Lagos, the Head, Research & Corporate Strategy, PenCom, Dr. Farouk Aminu, said, with this approval, the commission is working on ensuring that the scheme commence in January, 2019, noting that this is a development that could enhance the growth of pension assets in the country. He said the commission is currently working on the ICT infrastructure to support the implementation and to ensure effective take off of the plan.
He further confirmed that the micro pension will be voluntary and there will be a lot of flexibility in the plan to allow it to work, stressing that the contributor will decide whether to be contributing daily, weekly, monthly or quarterly.
The contributor 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also have access to 40 per cent of his contributions, while 60 per cent will be locked in as Pension, and can only be withdrawn when the contributor retires.
He assured that there will be no bottleneck in collecting the money when the retiree wants it, because PFAs will handle all approvals unlike the normal one that all approvals will come from PenCom.
He stressed that the micro pension plan is a scheme meant to capture people in the informal sector of the economy and expand the outreach of the new pension scheme.
Similarly, the Executive Secretary, PenOp, Ms. Susan Oranye, said though the pension funds has grown to N8.2 trillion and the number of contributors has risen to about 8 million, the huge population of 160 million shows a lot of potential exist in the pension industry.
The micro pension scheme, she said, will explore the potentials in the pension industry by persuading players in the informal sector to join the Contributory Pension Scheme(CPS) through the micro pension plan. When more people subscribe to the plan, she said, it will increase the pension assets, hence, allowing pension fund operators to invest more funds for economic growth and development.
However, the Head, Corporate Communications, PenCom, Peter Aghahowa, said, the micro pension scheme is made flexible for people to easily join, while the method of contribution is decided by the contributors, who are to chose whether to contribute daily, weekly, monthly, quarterly, and so on.
Moreover, he said, anybody who is 16 years and above is eligible to join this scheme with permission of a guardian.
He stressed that the regulator and operators are jointly working on the I.T infrastructure to ensure a seamless operation of the plan.
PenCom, had earlier said, the scheme, if it finally takes off, has the potential to generate about N3 trillion to the pension assets, while it intends to mobilise about 12 million contributors within five years.
Micro Pension plan, according to PenCom, is expected to capture self-employed people, especially those with irregular income, usually in the informal sector and are largely financially uninformed with limited or no access to financial services especially pension plan.
Section 2(3) of the Pension Reform Act, 2014 legal framework extends the coverage of the Contributory Pension Scheme to self-employed persons through micro pension scheme.
PenComs, Acting Director-General, Mrs. Aisha Dahir-Umar, stated that 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.
She maintained that the Commission expects that the implementation of the Micro Pension Plan will yield positive results for Nigerians and the Nigerian Pension Industry and that is however need to create more awareness about the plan.