September 12, 2022

PenCom reiterates benefits of micro pension plan

Pension fund

…Steps up sensitization to lure informal sector workers

By Victor Ahiuma-Young

National Pension Commission, PenCom, has once again, implored the informal sector workers to take the advantage of numerous benefits of the Micro Pension Plan, MPP, to secure a quality and stressless retirement life.

This came as the commission stepped up awareness campaign to lure informal sector workers to key into MPP and save themselves of old age poverty or become nuisances to relations and others

One of such awareness campaigns was a workshop on Increasing Informal Sector Participation in the Contributory Pension Scheme, CPS, : The case for Micro Pension Plan, Organised by the commission in Lagos for Journalists.

Speaking on the “The Micro Pension Plan: Bringing Financial Security at Old Age to the Doorsteps of the Informal Sector”, Head of Micro Pension Department, Mr. Dauda Ahmed, recalled that MPP was launched by President Muhammadu Buhari in March, 2019, after the commission had issued guidelines and framework for MPP in 2018.

While informing that at 31 July 2022, registration by informal sector workers to the scheme was 81,674, he noted that the total Contributions stood at  N296,957,107.11, saying “Total Contingent Withdrawals stood at N22,363,726.87 (118 MPC). Conversion from Informal to Formal –   N4,934,634.93 (430 RSAs).

According to him, “The Informal Sector constitutes a large and persistent scale in any economy, especially in Africa. In Nigeria, over  80 percent of the working population  falls under the informal sector. Informal sector workers are heterogeneous in nature because the sector employs a wide range of individuals, ranging from wage earners and self-employed to domestic workers. They are often characterized with irregular income and lack long-term saving culture.

  “However, there is absence of social safety nets that can provide better future/retirement plan for the informal sector workers.. Thus, without an urgent and effective policy as well as regulatory response to large-scale pension exclusion of the informal sector worker, poverty among the future elderly could become the dominant cause of increased poverty in Nigeria.

“A policy response is the introduction of the MPP to ensure that informal sector workers have an opportunity to save for their retirement. The MPP is a long-term voluntary financial plan for the provision of pension coverage to the self-employed, and persons working for organisations with less than three employees who are mainly in the informal sector. It means that  accountants, architects, lawyers, artisans, traders, stylists, farmers, commercial drivers and more  can contribute for their pension.”

Speaking on the benefits of MPP, Ahmed said “It will improve the standard of living of the elderly as it provides a regular stream of benefits at old age. It will provide access to other incentives. It secures financial autonomy and independence of retirees. Contributions will be passed to the next of kin in case of contributor’s death.”

He explained that  “The MPP is a voluntary plan as informal sector workers are not mandated to participate. Minimal requirements for registration into the MPP is the National Identification Number, NIN, membership of association/union, with or without formal employment contract.”

  Ahmed noted once one is 18 years and above, such a person can register, disclosing that “Contributors can register with any  Pension Fund Administrator, PFA, of their choice.  Contributions are  flexible. That is it can be  daily,  weekly, monthly  or at the  contributor’s convenience. For convenience, it uses multi-channel platforms e.g. mobile money payment, cash deposit or funds transfer.

“Contributions are segregated into  Contingent portion (40  percent) and  Retirement Benefits portion  (60 percent). Contingent portion can be withdrawn three months after the initial contribution and subsequently, once every week. The retirement benefit portion can only be accessed when the MPP participant attains the age of 50 years or on medical incapacitation.”

He explained that “Benefit payments could be through either Programmed Withdrawal or Life Annuity. For death or missing person, the benefits are transferred to the Next of Kin, NOK.”

The head of MPP department added that based on the provisions of the Pension Reform Act, 2014 it was impossible to convert an account from a formal sector contributor to an informal sector contributor but said the provision could be reviewed in favour of those who would be interested in migrating to the informal sector accounts.