Achieving financial security, micro pension statistics in Nigeria indicate that more than eighty percent of the labor force is in the informal sector.
The informal sector consists of self-employed workers, domestic workers and even some salaried workers who sometimes struggle with irregular income and savings, hence the need for a micro-pension scheme, MPP
The Micro-Pension Scheme, according to the Head of the MicroPension Department of the National Pensions Commission, Mr. Dauda Ahmed, is a long-term voluntary financial plan for the provision of pension coverage to the self-employed and those working for organizations with less than three employees. who are mainly in the informal sector
Accordingly, accountants, architects, lawyers, craftsmen, tradesmen, stylists, farmers, commercial drivers and others can contribute towards their pension.
Mr. Ahmed listed the benefits of the MPP to include, improving the standard of living of the elderly, access to incentives as well as ensuring the financial autonomy and independence of retirees.
Next of kin as beneficiaries
The plan also allows the contribution to be passed on to the next of kin in the event of the death of the contributor.
The Micro Pension Plan is voluntary, workers in the informal sector are not required to participate.
Regarding registration, the head of the micro-pensions department in a document entitled, “The micro-pension scheme: bringing financial security in old age to the gates of the informal sector” explained that the requirements were minimal.
This includes national identification number, NIN, association or union membership, with or without a formal employment contract.
In addition, the worker who must have reached the age of 18 can register with any pension fund administrator.
The flexibility of the plan also makes it attractive as it can be done daily, weekly, monthly or at the convenience of the contributor using multi-channel platforms such as mobile money payment, cash deposit transfer or funds transfer .
While explaining the contribution withdrawals, Mr. Ahmed said: “Contributions are separated into a contingent part (40%) and a pension benefit part (60%).
The conditional part can be withdrawn three months after the initial contribution and thereafter once a week.
retirement benefit To plan
The Retirement Benefit part is only accessible when the MPP participant reaches the age of 50 or in the event of medical incapacity.
Mr. Dauda Ahmed further explained that the payment of benefits could be made either by scheduled withdrawal or by life annuity, while in the event of death or disappearance, the benefits are transferred to the next of kin.
As laudable as the plan is, it comes with challenges which Mr. Ahmed said include insufficient awareness of the micro-pension scheme among informal sector workers as well as inadequate incentives to encourage participation.
Others are different competitive products in the market such as savings savings, negative perception, lack of confidence of Nigerians on the administration of pensions under the defunct defined benefit scheme.
The head of the micro-pensions department, however, listed strategies adopted to encourage participation to include product design that supports flexibility around contribution rebates as well as emergency withdrawals.
Others are media campaigns to increase awareness of the plan and engagement with key stakeholders to ensure buy-in to the plan.
Reporting by Folasade Orimolade; edited by Adeniyi Bakare