Factors dragging down Micro Pension

The introduction of the micro pension scheme, which was launched by President Muhammadu Buhari on March 28, 2019 to achieve the noble goals of taking financial inclusion to the unorganised or informal sector, is definitely a laudable idea.

The Pension Reform Act 2014 provided for it at Section 2(3). The National Pension Commission (PenCom) set out clear guidelines for its take off, while the Pension Fund Administrators (PFAs) appear, yes appear, to be implementing the plan.

Section 2(3) of the Pension Reform Act, 2014 provides that employees of organizations with less than three employees as well as the self-employed persons shall be entitled to participate in the Contributory Pension Scheme in accordance with Guidelines issued by the Commission.

The categories of people listed at paragraph two here, might be blacksmiths, artisans, mechanics, panel beaters, micro shopkeepers, kolanut and garden eggs hawkers, butchers, porters and motorcycle taxi riders and operators of tricycles. They are among the main target of enrolment into the Micro Pension Plan by the National Pension Commission and the Pension Fund Administrators.

There is a very strong and genuine need for micro pension plan as argued in these pages previously. But enrolment into the micro pension plan is voluntary, rather than automatic or compulsory. This fact is constraining the pace of enrolment into the plan by the targeted groups.

Other factors that are slowing down the process of getting people into the micro pension plan includes the fact that there is a semblance of it in the “adashi” concept, a contributory scheme, although with a short to medium terminal date depending on the number of participants, often a group of friends or associates.

The culture of caring for the aged by members of extended families seems to be more reliable, time-tested and dynamic than a micro pension plan that puts restrictions on access to one’s money to urgently care for aged uncles and aunties.

It is also undeniable that the elite have repeatedly initiated laudable programmes that could have positive impact on the lives of the ordinary citizens, but which were implemented half-heartedly or abandoned midway. This gave rise to elite suspicion, which is entrenched among the class of the targets of the micro pension plan.

The muted growth of the economy as acknowledged by the authorities has reduced the type of economic activities that put money in the pockets of the potential enrolees, thereby impeding their tendency to give priority to saving money for the future. Meeting immediate needs of the family from the barely enough income of the day is a stronger priority than saving for the rainy day.

The assumption that artisans, vulcanisers, taxi drivers and iron mongers will spare hours of their time to visit the cosy offices of Pension Fund Administrators to enrol in large numbers is a tall order. They can hardly trade off that with using the time to attend to their customers.

The possession of the National Identity Number (NIN) as one of the preconditions for enrolment in the micro pension plan, is another factor pushing the low income earners and self-employed away from a scheme that could ultimately benefit them.

As consumers of news from multiple sources, they regularly hear the cries of unpaid pensioners, which dimmed the brightness of saving money for a pension plan managed remotely by people in offices.

The PFAs should borrow from the Ghanaian micro pension plan promoters by sending their staff to visit their potential customers on-site for biometrics capture and opening retirement savings accounts. This was what worked in Ghana, according to Robert Trimmer.

To enrol a large part of the estimated over 30 million self-employed Nigerians running the informal portion of the economy in the micro pension plan, the pension management entities have to creatively brace up and convert those obstacles into opportunities.