Nigerians are leveraging on their micro pension funds for survival, as cost of living soars on high inflation as well as economic hardship.
This trend, analysts say captures the flexibility in the micro pension scheme, which is intended to support individual and household meet basic needs from time to time.
Data from the National Pension Commission (PenCom), and compiled by the Pension Fund Operators Association of Nigeria (PenCom) show that from N68.79 million generated from micro pension in the second quarter of 2024, participants withdrew N87, 167.96 to meet their needs.
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Oguche Agudah, chief executive officer, PenOp commenting on the micro pension performance in the second half of the year said, “This plan provides a dual advantage. It does not only build long-term retirement savings, it also allows contributors to make partial withdrawals from their funds after a consistent period of contribution.”
Launched in 2019, the Micro Pension Plan aims to extend retirement benefits to workers in the informal sector who traditionally lack access to structured retirement savings.
Agudah said despite a gradual registration rate, attributed to factors such as low awareness and limited understanding of pension benefits, the Micro Pension Plan is a valuable safety net for informal sector workers, promoting financial stability in their later years.
Chika Onwunali, managing partner, Premium Debate said addressing issues around slow growth of micro pension requires a multifaceted approach, including improving financial education, enhancing the stability and accessibility of micro pension programs, and implementing policies that support income stability for vulnerable populations.
On the withdrawal of the funds to meet current needs, he said the growing withdrawal of micro pensions in Nigeria highlights a significant challenge for many citizens who rely on these small savings to weather economic hardships.
“As living costs rise and inflation impacts daily life, many individuals are being forced to dip into their savings or forgo contributions altogether to meet immediate needs.
The data further shows that in the second quarter of the review period, 18, 624 contributors were registered the scheme.
This brings the total number of micro pension participants to 143,565 and total contributions to N88.36 million since inception of the scheme.
Experts at Crusader Sterling Pension said over the years, pension in Nigeria has been limited to the formal sector. However, the introduction of the Micro Pension Plan (MPP) in 2019, has extended the Contributory Pension Scheme to include both formal and informal sectors of the Nigerian economy
The said MPP is a retirement savings scheme specifically created for individuals in the informal sector (business owners, artisans) and organisations with less than three employees.
“It allows contributors to save towards their retirement or in case of incapacitation. The MPP is designed to provide future financial security for these groups and help them enjoy a peaceful life upon retirement or when they can no longer work to make a living.”
On who can participate, the experts explained “It is anyone over 18 years of age with a legitimate source of income in Nigeria, including artisans, the self-employed, members of associations, unions, cooperatives, trades, and operators of small and medium-sized businesses.”
According to them, Micro Pension Plan allows contributors to make daily, weekly, or monthly contributions through various channels, including cash deposits, electronic transfers, and other electronic payment platforms approved by the Central Bank of Nigeria (CBN).
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They said each contribution is divided into two parts:
Contingent Contributions (40 percent)
This portion is available for withdrawal to meet urgent needs. The first withdrawal can be made three months after the initial contribution and subsequently once a week.
Retirement Benefit Portion (60 percent)
This portion is reserved for retirement and can be accessed from age 50 or in the case of health issues.
Benefits of the Micro Pension Plan (MPP)
Financial Security in Retirement: The MPP helps combat old-age poverty by providing a steady income stream during retirement, ensuring financial stability and peace of mind.
Flexible and Affordable Contributions: Allows small, flexible contributions based on individual financial capacity, making it accessible to those with varying income levels.
Accessibility and Inclusivity: Designed for individuals in the informal sector and small business owners, the MPP is a flexible system that allows periodic contributions and withdrawals.
Growth of Savings: Contributors’ funds increase over time due to interest paid by Pension Fund Administrators from investments made with the funds.
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