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Micro-Pension accounts unfunded — AIICO Pension

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Launches gift a pension

Micro-Pension accounts unfunded — AIICO Pension

By Cynthia Alo

Indication has emerged that the Micro-Pension Scheme, MPC, launched last year by President Muhammad Buhari, may have run into a hitch as industry watchers point to the fact that most of the account holders are not funding their accounts.

As part of efforts to get the scheme going, a Pension Fund Administrator, PFA,  AIICO Pension Managers Limited,  has launched a product; gift a pension to address the poor funding of micro pension accounts by holders.

According to the PFA, a ‘gift a pension’ package, an initiative that will allow people who are in the formal sector to fund the pension account of their domestic staff and personal staff whose income is low.

READ ALSO: AIICO Insurance grows GWP by 32% in H1’19

Speaking to Pension and You,  AIICO Pension’s Head of  Strategic Planning, Corporate Communications, Mr. Bankole Ekundayo,  said the pension firm realized that the informal sector financial penetration was low and a lot of people were willing to open a pension account but had no capacity to fund the account.

According to him, the initiative would address the low compliance level of funding in the micro pension scheme, lamenting that a lot of micro pension accounts had been opened but not funded as it was difficult for people to set money aside.

For him, this triggered the firm’s intuitive to devise the initiative to allow people who “can” to fund people who “cannot’.

Ekundayo explained that the move would motivate those in the informal sector to imbibe the culture of funding their accounts especially when they saw their accounts were yielding interest over time.

Bank alert

He said “By the time they keep getting alert and seeing their interest rate increase, they will be motivated to also put in money. You are aware that in the formal sector, the employers deduct mandatorily from the account of their employees to fund their pension account but for those in the informal sector, they do not have that opportunity.

“Is more like a gift of a pension, so you know for you and I, our employer deduct mandatory every months but for those in the Informal sector, they don’t have the opportunity instead the pension contributions come from their disposable income which is very tin these days. so this initiative is one that allows people who can fund to gift pension contributions.

“So, for instance, I have a driver, a cook or Gardner who has a micro pension account, as the employer, I can assist him and encourage him and possibly enlighten him on the benefits of having a retirement savings account by funding his pension account for him. The contribution can come monthly, once a year, and or on special occasions that allow you to reward your domestic staff by funding his pension account. So, the burden of funding is shared between the employer and his domestic staff.”

READ ALSO: AIICO commences agriculture insurance

Ease of operation

He stated that for ease of operation, there is no fixed rate for the contribution as one can decide to put in any amount. There is no mandatory percentage like we have in the formal pension where you have 10 percent from the employer, eight percent from the employee. Pension account we don’t have dormant, so macro account u can pay any amount. The initiative will bridge the gap in terms of enlightenment between the formal and the informal sector. This is because people in the formal sector already know and appreciate the concept but those in the informal sectors don’t.

“Even if they do they are not empowered enough to be able to delay gratification in a little time. The whole concept of delayed gratification is that I have something that I put aside today to get value tomorrow but a lot of people in the informal sector don’t have enough today talk more of asking them to put some parts of that aside for tomorrow. So because that concept is difficult to grasp by those in that space, it is a major challenge but with gift a pension, we are hoping to get a culture of gratification.”

According to him, “to increase the penetration level in the country, there has to be increased effort on sensitization, flexibility into the options of retirement because people feel that the options are a bit restrictive.

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