The micro pension scheme in Nigeria, designed to provide pension savings for low-income and informal sector workers, is facing challenges as economic hardships seem to be impacting contributions from participants. Here are the key points from the recent report by the National Pension Commission (PenCom):
1. **Decline in Contributions**: In the first quarter of 2024, contributions to the micro pension fund dropped by 35.4% to N111.4 million compared to N150.8 million received in the preceding quarter (Q4’23). This decline indicates a reduction in savings capacity among informal sector workers who contribute to the scheme.
2. **Increase in Registrations**: Despite the decline in contributions, there was a significant growth in the number of Micro Pension Contributors (MPCs) registering with Pension Fund Administrators (PFAs). Registrations increased by 40.7% to 12,559 in Q1’24 from 8,927 in Q4’23. This suggests ongoing efforts to expand the reach of the micro pension scheme.
3. **Purpose of the Micro Pension Plan**: The micro-pension plan (MPP) was established to encourage self-employed individuals and informal sector workers to save for retirement. It is a crucial financial inclusion measure aimed at ensuring financial security in old age for a segment of the population traditionally excluded from formal pension systems.
4. **Achievement and Challenges**: Despite aspirations to enroll about nine million registrants by 2023, only 126,941 contributors were registered as of Q1’24. This indicates a gap between targets and actual participation, possibly influenced by economic factors affecting the ability of individuals to save consistently.
5. **Pension Fund Administrators (PFAs) Involvement**: Access Pensions Limited accounted for a significant portion (80.1%) of new registrations in Q1’24, followed by Stanbic IBTC Pension Managers Limited with 12.96%. These PFAs are instrumental in implementing the micro pension plan and expanding its coverage across Nigeria.
6. **Way Forward**: To address the challenges faced by the micro pension scheme, there is a need for continued awareness campaigns, improved economic conditions to enhance savings capacity, and possibly policy adjustments to incentivize contributions. Ensuring the sustainability and effectiveness of the scheme will require collaborative efforts from stakeholders including PFAs, regulators, and the government.
In summary, while there is growth in the number of registrations under the micro pension scheme, the decrease in contributions underscores the impact of economic hardships on informal sector workers’ ability to save for retirement, posing challenges to the overall success of the initiative.