One unique attribute of spices is that, apart from enhancing the content they are added to, they make food content tastes better, emits better aroma that is appealing and makes mouth waters. Take away the spices from such food, and it becomes disgusting and unappealing.
When the Micro Pension Plan (MPP), which is a long-term voluntary financial plan, came up in 2019, it is meant to provide pension coverage to the self-employed, and persons working for organisations with less than 3 employees who are mainly in the informal sector.
To this end, it means that accountants, architects, lawyers, artisans, traders, stylists, farmers, commercial drivers and more can contribute for their pension.
While it is expected to improve the standard of living of the elderly as it provides a regular stream of benefits at old age; secures financial autonomy and independence of retirees, among others, there were not enough condiments to spice up the plans to attract more uptake.
According to the head, Micro Pensions Department, National Pension Commission (PenCom), Dauda Ahmed, lack of adequate incentives to encourage participation were actually the main reason for slow uptake.
For increase subscription to this plan, he advocated for inclusion of incentives that will give value to subscribers.
Reasons For Micro Pension Plan
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 characterised 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 Micro Pension Plan (MPP) to ensure that informal sector workers have an opportunity to save for their retirement.
Speaking on the motive behind the scheme, the director-general, PenCom, Aisha Dahiru-Umar said, “The micro pension initiative of the commission started in accordance with Section 2(3) of the Pension Reform Act, 2014, which provides that employees of organisations with less than three employees as well as self-employed persons shall be entitled to participate under the scheme in accordance with the guidelines issued by the commission.”
This development, she stressed, prompted the creation of the micro pension plan.She disclosed that since commencement of the micro pension plan three years ago, 81,674 subscribers have been registered as at July 31, 2022.
She added that total contributions by MPP subscribers stood at N296,957,107.11, total contingent withdrawals stood at N22,363,726.87 and conversion from informal to former sector was N4,934,634.93.
Challenge
Dauda Ahmed, in a paper entitled: ‘The Micro Pension Plan; Bringing Financial Security at Old Age to the Doorsteps of the Informal Sector,’ which he delivered at a seminar organised by PenCom for journalists in Lagos recently, identified challenges such as; insufficient awareness of the Micro Pension Plan by informal sector workers; lack of adequate incentives to encourage participation; different competing products in the market with more flexibility towards access to funds, such as thrift savings/daily collections; negative perception/trust deficit stemming from the experience of Nigerians on pension administration under the defunct defined benefit scheme; non-adoption of shared services arrangements, which results in high infrastructure setup cost for PFAs to drive MPP nationally and COVID-19 and the slowdown in economic activities. All these, he said, were hindering the growth of the plan.
Need To Spice Up MPP
Managing director/CEO, Access Pension Fund Custodian, Mrs Idu Okwuosa- Okeahialam, said the Pension Fund Operators Association of Nigeria(PenOp) is working assiduously to embed robust incentives into the micro pension plan.
Okwuosa- Okeahialam, who is also an executive of PenOp, noted that PenOp and PenCom desire a better lifestyle for micro pension contributors and are working to see that, aside the benefits of retirement and contingency savings, contributors maximise other robust incentives.
One of the incentives, which is term life assurance and also known as pure life assurance, is a type of life insurance that guarantees payment of a stated death benefit if the covered person dies during a specified term. Once the term expires, the policyholder can either renew it for another term, convert the policy to permanent coverage, or allow the term life assurance policy to terminate.
She disclosed that operators and the regulator are planning to provide free health insurance for contributors of the micropension scheme, adding that, the move was meant to drive inclusion in the scheme.
“The pension operators had a meeting and had resolved to enrol contributors of the micro pension scheme with the Health Maintenance Organisations,” she said.
Submission
Although, NATIONAL ECONOMY learnt that there is currently an ongoing engagement between PenCom and pension fund operators to fine-tune the incentives that will be added to the micro pension scheme, both parties are running against time, if truly they are serious about deepening pension penetration in the informal sector.
It was learnt that pension operators are currently engaging insurers on how to infuse life and health insurance into the scheme, but the slow pace of discussion seems a concern to the onlookers.
The earlier the parties involved conclude on these details and initiation, the better for, not only the Micro pension scheme, but the entire pension industry.
