ByÂ Ifeanyi Ugwuadu
It is irrational for the poor to save for retirementâ€. Rob Rusconi, an internationally acclaimed expert in pension provision must have jolted many Nigerians, particularly, government, when he delivered his paper and made the above quoted declaration at the National Conference on the review of the Implementation of the Pension Reform.
His paper, â€œSecuring Informal Sector Participationâ€ was perhaps the most awaited of the seven papers delivered at the 2-day conference. Certainly, he must have disappointed many people when he said the poor in our country and indeed the whole of Africa were burdened with much government-imposed hardship that it would be another imposition too many to ask them to save the little they have for a future they are not sure will come.
In any case, they do not have anything to save as they live from hand to mouth, he observed. Part of the tragedy of Africa is that people work until they die. Ostensibly, not because they prefer to work to their grave but due to absence ofÂ social security and poverty, Rusconi explained.
â€œMost governments in Africa have lost connection with the peopleâ€ and are in no comfortable state to ask them to give money to a system that is controlled by the same government that has failed them overtime. For any meaningful participation by the informal sector, a robust policy initiative aimed at genuinely bridging the gap between the government and the people on one hand and the rich and poor on the other has to be in place.
However, for Rusconi, these group of people constitutes the largest percentage of the Nigerian working population categorised under the informal sector. But he did not canvass their exclusion from contributing their savings to the new pensions scheme rather, he proposed a systemic approach to reaching out to them based on winning their trust.
Rusconi made some key valid points about Nigeriaâ€™s adoption of the contributory pensions schemeÂ which if operators are able to put into scale would take the system far.
â€œThe task before Nigeria is enormousâ€, he noted and emphasised the need to convince the informal sector that the system works to their benefit. Other vital points the pension consultant made strengthens the argument that government must be for the people and not the other way round. For instance, he wants government to explore opportunities that persuade people to believe more in their leaders than to see every step they make as anti-people.
â€œSocial security to the elderly helps keep society togetherâ€, Rusconi pointed out in his paper.Â He explained that a society that helps keep its old people at home where they help in an immeasurable way, giving love to young ones and directing with their experience the footsteps of the growing children.
Rusconiâ€™s arguments for a government incentive that encourages the informal sector to contribute to their future is based on the following hard facts:
* The informal sector is the largest in Africa,* Most saving take place outside the reach of policy making and regulation,* There is no social security for the poor,* Government is perceived as enemy of the people,* The economy is poorly managed * The poor already bear the brunt of the mismanaged economy.
These are hardly incontrovertible facts and unless it is thoroughly understood and worked out very well, the enthusiasm and participation of the informal sector would hardly be secured.
Rusconi didnâ€™t suggest any particular model to secure wider participation to the contributory pensions scheme but he laid down principles out of which the informal sector could be persuaded to join. Aside trust, policy coherence and demonstrating an understanding of the people, Rusconi proposed an incentive of equal ratio between government and the individual contributor.
For instance, government can propose that for every N1000 contributed by any individual, it would match it with another N1000. If people see that government actually pays such amount to their individual retirement savings account, they will show more enthusiasm towards the scheme and may increase their monthly contribution.
Since Rusconi argued against tasking the very poor to cater for their future, he asked government to tax the rich more in order to put more money in developmental projects that create more jobs and deliver more a lot more incentives for the poor to participate.
Creating products that encourage the informal sector to contribute to their retirement was one key challenge Bob Rusconi handed down to operators of pensions in Nigeria. Fashioning products that key into the expectations of the people is a s important as the incentive to contribute, he stated with a note of caution that it would not be easy.Â But targeting the informal sector through their unions and groups may prove to be helpful.
Finally, moral suasion, winning trust, research, education and enlightenment coupled with a sustainable policy and important elements in the expansion of the pensions scheme into the informal arena.
Compliance: After five years of operating the CPS in Nigeria, the surprising result is that the private sector had been the greatest defaulter in complying with the provisions of the Act.
For a sector that is reputed to be more proactive and efficient than the public sector, this is indeed an upset. While compliance is at the very low point in the private sector, the Federal Government has done very well by remitting regularly the pension contribution of its employees as well as its own contribution.
However, participation by most State Governments in the scheme is still a huge problem. Some States would prefer to leave their retirees to grapple with their after-work life rather than cater for them. In the light of the above situation, experts a wider legislation which can capture more state governments to comply with the CPS.
But while the private sector was indicted for poor remittance records, some reasons were adduced for this by experts. Probably, if the government overtime had proven to be efficient, the private sector would have been persuaded to comply with the law. Although, the National Pensions Commission received wide endorsement for establishing itself as the best regulator in Nigeria, it was thought that it would go the way of most regulators set up by government. Hence, part of the poor remittance records was blamed on the failure of the past which gave a good excuse for some employers in the private sector to withhold their contributions. However, harder sanctions were considered to be okay for improved compliance.
Experts proposed an early warning system that alerts employers who delay or withhold remittances tp PFAs to increase compliance. In addition to expanding the investment windows, Pencom and government were tasked to seek tax efficient laws that protect investment of pension assets.
Besides, a lot more flexibility in accessing the contribution made into the scheme must be introduced to encourage people in the informal sector.Â This was considered a key factor in the campaign to secure a wider participation.