Financial Inclusion: The Micro Agenda for Pension and Insurance Sectors, a Paper delivered at the 2019 the National Association for Insurance and Pension Correspondents Conference, by Mrs. Aisha Dahir-Umar, Acting Director General, National Pension Commission on ​​​29th August, 2019

Mrs. Aisha Dahir-Umar

Financial Inclusion: The Micro Agenda for Pension and Insurance Sectors, a Paper delivered at the 2019 the National Association for Insurance and Pension Correspondents Conference, by Mrs. Aisha Dahir-Umar, Acting Director General, National Pension Commission on ​​​29th August, 2019

1.0 Preamble

I am honoured to be invited by the National Association for Insurance and Pension Correspondents (NAIPCO) to speak at the 2019 Annual Conference. We congratulate the executives and members of NAIPCO for yet another milestone. Indeed, the annual conference is a veritable platform to enhance the capacity of members on pertinent issues affecting the pension and insurance sectors, interact with key industry players as well as to review recent activities of the association. The theme of the Conference “Financial Inclusion: The Micro Agenda for Pension and Insurance Sectors” is appropriate for the Commission to highlight the Micro Pension Plan which was formally launched by His Excellency, President Muhammadu Buhari in March, 2019 at Abuja.

2.0 The Micro Pension Plan in the Context of the National Financial Inclusion Strategy

It would be recalled that the Financial Inclusion Strategy (NFIS) was launched in 2012 by the Central Bank of Nigeria (CBN) to improve access to financial services and products by the Nigerian adult population. This followed the 2010 Access to Financial Services Survey, carried out by Enhanced Financial Innovation and Access (EfinA), which indicated that only 36% of Nigerian adults have access to financial services. The strategy, thus aimed at achieving a 34% increased access to financial services and products by the year 2020, which means, attaining a 70% inclusion rate. The NFIS implementation is being driven through a robust collaboration amongst regulatory agencies including the National Insurance Commission, National Pension Commission, Securities & Exchange Commission, Nigeria Deposit Insurance Corporation and the Nigerian Communication Commission.

The Commission in its effort to expand the coverage of the Contributory Pension Scheme (CPS) within the framework of the National Financial Inclusion Strategy (NFIS), has developed key initiatives, which are currently being implemented. The Commission’s target of extending pension coverage to 30 million contributors by 2024 is in-line with achieving the NFIS target of ensuring that 40% adult Nigerians are covered under the CPS. The key strategy being implemented by the Commission to drive this coverage is the extension of pension coverage to the self-employed and the informal sectors of the economy through the “Micro Pension Plan” (MPP).

The commencement of the Micro Pension Plan following the Presidential launch is a significant milestone in the implementation of the CPS since its commencement in 2004. The MPP is a tool for achieving one of the cardinal objectives of the CPS, which is to assist improvident individuals to save in order to cater for their livelihoods in old age. Due to this imperative, the Commission has, for several years intensified efforts at putting in place the necessary infrastructure and regulatory framework to ensure a smooth implementation of the MPP. Some of these include the establishment of the Micro Pension Department in the Commission; issuance of Guidelines for implementation; Information Technology Registration Platform upgrade through the Enhanced Contributor Registration System (ECRS) to enable MPP participants and Cross Border individuals’ registration, amongst others.

The Commission has given considerable thought to the peculiarities of the persons in the informal sector in the design and implementation of the MPP as we shall describe in this paper. Consequently, significant flexibilities have been introduced in order to encourage wider participation. However, we recognise that adequate public enlightenment is key to success and would, therefore, continue to count on the support of NAIPCO members in that regard. Already, the Commission is working at a tailored sensitisation programme for the targeted participants.

3.0 A Synopsis of the Guidelines on Micro Pension Plan (MPP)

The Micro Pension Plan is an arrangement for the provision of pension to the self-employed and persons operating in the informal sector leveraging some salient provisions of the Pension Reform Act, 2014. Undoubtedly, the informal sector accounts for a greater percentage of Nigeria’s Labour Force, which unfortunately, is often not covered by adequate social protection schemes. Thus, the Micro Pension Plan is designed to provide this category of persons with a veritable means of securing old age income with some incentives to encourage participation by the target groups.

The Micro Pension Plan is also aimed at low-income earners who are often financially uninformed and usually have limited or no access to financial services. It is also the sought-after solution to old age poverty as can be found in jurisdictions like India, Kenya and Ghana who have successfully implemented a Micro Pension Plan.

2.1 Features of Micro Pension Plan

It is noteworthy to provide a treatise of the features of the MPP to aid a better understanding for the prospective participants. In terms of eligibility, the MPP is designed to cover the following persons who should be not less than 18 years of age with legitimate source of income: self-employed persons that belong to a Trade, Profession, Cooperative or Business Association; self-employed persons with a business registration as a company, partnership or enterprise; employees operating in the informal sector who work with or without formal written employment Contract and other self-employed individuals.

Registration into the MPP is conducted through a flexible and simplified process conducted by the Pension Fund Administrator (PFA) via a multi-channel platform. Documentation requirements have been eased significantly to facilitate the registration. It is the PFA’s duty to communicate the Retirement Savings Account (RSA) Personal Identification Number (PIN) to the MPP contributor after registration.

The contribution is flexible (daily, weekly or monthly) for convenience while contribution rate is based on a Contributor’s aspiration and financial capacity. A major flexibility for the participants is the provision that contributions shall be split into 40% for Contingency (thus available for withdrawal to meet recurrent needs) and 60% for retirement benefit (to provide pension for the participant). Also, contributions can be via cash deposit, electronic platforms or money agents. It should be noted that the contributions are invested in line with the MPP investment guidelines issued by the Commission. The PFAs are required to issue RSA statements to participants which show the position of the funds at any given time.

While it should be understood that the main objective for participating in the MPP is primarily towards pension, two types of withdrawals are allowed, i.e. contingency and retirement benefits withdrawal. These payments are made only through CBN approved channels. In the event of death of a contributor, the RSA balance is paid to the named beneficiary. Retirement benefits portion can be accessed upon retirement and attaining the age of 50 years or on health grounds. The retiree has the option of choosing either Programmed Withdrawal or Annuity modes of access. On the other hand, the contingency portion is eligible for withdrawal 3 months after making the initial contribution. Subsequently, withdrawals can only be made once in a week from the balance. The contributor may however, choose to convert the total balances to the Retirement Benefit Account at the end of every year or at retirement.

4.0 Conclusion

In conclusion, the Commission expects that the implementation of the Micro Pension Plan will yield positive results for Nigerians and the Nigerian Pension Industry. It would also assist greatly in the reduction of old age poverty in Nigeria. The contributions from the Micro Pension Plan would further boost the pension fund assets towards an improved economic development.

The Commission has put in place requisite infrastructure to facilitate seamless implementation of the MPP. The Enhanced Contribution Registration System (ECRS) has been deployed to facilitate seamless operations of the MPP. This system has so far aided the smooth registration of Micro Pension Contributors.

On behalf of the Commission and the entire Pension Industry, I would like to express our profound appreciation to the Association for its consistent support, which has assisted us immensely in recording modest achievements, as well as educating and enlightening the public on the workings of the CPS and the Commission’s activities.

Thank you very much.

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