The Federal Government has plans underway to roll out a micro-pension scheme for self-employed individuals such as artisans, lawyers, accountants among others, early next year.
The pilot phase of the micro-pension scheme is expected to kick off by the second quarter of next year. With the introduction of the scheme, the Federal Government, through the National Pension Commission (PenCom), would be bringing more Nigerians under the pension’s umbrella, thus ensuring savings for the rainy day.
This was made known at a workshop organised for finance, insurance, labour and business editors in Calabar, Cross River State.
PenCom Head, Micro Pensions Department, Mr. Polycarp C.N. Anyanwu, described micro pension as an initiative that exists for the provision of pension coverage to self-employed individuals.
Anyanwu says micro pension is a global trend and the scheme engages and extends pension to the larger working population, especially those outside the formal sector.
Micro pension in Nigeria covers three strata – the lowest, middle and high-income earners. Artisans, accountants, lawyers, mechanics, tailors, traders, hairdressers, architects and engineers among others, who are self-employed in various trades and professions, are the commission’s target.
Anyanwu noted that the micro-pension scheme is an offshoot of the pension industry five-year strategic plan to expand the CPS coverage to 20 million contributors by 2019, adding that the pilot phase of the scheme would be targeting 250,000 enrolments within six months.
He disclosed that trade unions and associations are expected to assist by introducing the scheme to their members ahead of the kick-off of the pilot phase.
The commission is optimistic that the scheme will enable its contributors to access a regular stream of retirement benefits at old age; improve living standards of the elderly; benefit from the various incentives offered by PFAs; deepen financial literacy and secure financial autonomy and independence.
Other benefits include; passage of wealth to survivors in the event of death; increase in national savings and long-term funds; promotion of capital growth and development and access to mortgage and insurance markets.
On the prospects and expectations of the scheme, Anyanwu said the flexibility of registration, contributions, and withdrawal process will be contributors-friendly, stressing that self-employed persons have a large population.
The commission says the scheme will be characterized by a simplified registration process. The registration will be initiated through physical appearance, the internet and mobile phone. There will be a flexible frequency of contribution. The contribution and remittance will be made easy by splitting it to two – a smaller percentage of savings accessible to contributors and a greater percentage, strictly for the pension.
The same individual portable retirement savings account will be managed by the PFAs and the funds kept by the Pension Fund Custodians (PFCs). A special micro pension fund will be established for the flexibility of withdrawals to guarantee safety and fair returns on investment.
So far, the commission has established a micro pension department, developed a database, collaborated with potential contributors and the chambers of commerce and relevant government agencies like the Central Bank of Nigeria (CBN) and Small and Medium Enterprises Development Agency of Nigeria (SMEDAN).
According to National Bureau of Statistics (NBS), the proposed scheme, aimed at extending pension schemes beyond the formal public and private sectors, underscores the government’s conviction that the informal sector remains a critical part of the economy.
Statistics reveal that the informal sector which accounts for over 70 percent of the working population, has been uncovered by structured pension managers.
According to the NBS demographic, 37.6 million (representing 40.1 percent) of Nigeria’s 93.5 million adult population, operate within the informal sector of the economy.
A further breakdown of the demographic shows that 8.6 million (representing 9.2 percent) of the adult population earn their income from the formal sector; 49.4 million (representing 52.8 percent) is under 33 years; 58.7 million (representing 62.8 per cent) own a mobile phones and 21.5 million (representing 23.0 per cent) have no education.
The demographic profile also states that Nigeria has a largely rural population of 63.9 per cent, but there has been significant urbanisation since 2012. The Federal Capital Territory (FCT), Abuja’s population is growing at nine per cent per annum, Lagos is growing at three per cent and the national growth of two per cent.
The Gross Domestic Product (GDP) as at the end of last year, stood at about N94.1 trillion, with the informal sector accounting for N38.7 trillion and N55.3 trillion from the formal.
According to PenCom’s report on the current pension coverage, pension managers have 7.24 million contributors in their network as at September under the formal CPS. The figure represents about 7.7 percent of the labour force and above four percent of contributors in private and public sectors.