By Victor Young
AHEAD of the commencement of the the micro pension pension sachem, the National Pension Commission, PenCom, had in in 2018 released guidelines for the scheme.
For the records, the guidelines make the underlisted persons with legitimate sources of income eligible for participation in the Micro Pension Plan under Section 2 (3) of the PRA 2014:
- Self-employed persons that belong to a Trade, Profession or Business Association.
- Self-employed persons with a business registration as a company, partnership or enterprise.
- Employees operating in the “informal sector” who work with or without formal written employment contracts.
- Other self-employed individuals
- Micro pension sector largely untapped, constitutes 60% of population – Etaduovie
In other words, all self-employed persons and employees in the “informal sector” with legitimate sources of income are eligible to participate in the Micro Pension Plan.
The informal sector is defined in the Guidelines to mean “employees in companies that are not mandated to implement the Contributory Pension Scheme”. Accordingly, considering the category of employees that the Scheme is applicable to; i.e. employees in the public sector and employees in companies with 15 or more employees, it appears that employees of an organization with 14 or less employees may be classified as employees in the informal sector and thus, eligible to participate in the Micro Pension Plan.
It is, however, pertinent to note that to be registered under the Micro Pension Plan, an individual must be resident in Nigeria and must be above the age of 18 (eighteen) years. Notwithstanding same, persons between the ages of 15 18 may be able to participate if the approval of their guardians have been obtained.
Unlike the Scheme under the PRA 2014, the Micro Pension Plan is not to be mandatory.
Accordingly, an eligible person may choose to register under the Micro Pension Plan by opening a Retirement Savings Account (RSA) with its Pension Fund Administrator (PFA) of choice and providing the requisite documentation as specified by the PFA.
In a bid to accommodate the flexibility and irregu arity of income streams common to the informal sector, a Micro Pension Contributor may make contributions towards his/her pension either daily, weekly, monthly or as may be convenient. All contributions are however expected to be made in Nigerian Naira (NGN).
Furthermore, contributions are made entirely by the Micro Pension Contributor as opposed to the requirements of the PRA 2014 that an employer must contribute a minimum of ten percent (10%) of the employee’s monthly emoluments towards the employee’s pension. In other words, an employer of a Micro Pension Contributor (where applicable) is not required to make contributions into the RSA of such contributor.
Contributions under the Micro Pension Plan is to be divided and managed as two separate funds namely: Micro Pension Contingent Fund wherein 25% of the contributions will be payable for contingent withdrawals; and the Micro Pension Retirement Benefits Fund wherein 75% of the contributions will be payable for contingent withdrawals; and the Micro Pension Retirement Benefits Fund wherein 75% of the contributions will be payable as retirement benefits.
Accordingly, and unlike the Scheme, under the PRA 2014, a Micro Pension Contributor will be able to make contingent withdrawals i.e. access the portion of his/her contribution available for withdrawal one month after making the initial contribution, and subsequently at any time till the balance therein is exhausted. However, a Micro Pension Contributor has the option of transferring part of his/her outstanding balance on the contingent portion to his retirement benefits portion. All contingent withdrawals are subject to applicable tax laws.
The retirement contributions will only be accessible upon the Contributor attaining the age of 50 (fifty) years or on health grounds in accordance with the Regulation for the Administration of Retirement and Terminal Benefits.