Longe
How to ensure informal sector workers have a better life at old age remains a great concern for the leadership of the National Pension Commission (PenCom) and pension fund managers. Chuks Udo Okonta in this report, examines the plights and demands of workers and what the regulator and operators are doing to integrate the over 50 million workers in the informal sector into the micro-pension scheme.
Determined to bequeath a better life to the self-employed in the country, the National Pension Commission (PenCom) has commenced a nationwide dialogue with workers in the informal sector ahead of the commencement of the Micro Pension scheme which is expected to institute a saving culture amongst the workers.
Micro Pension is a financial programme for the provision of pension services to self-employed persons and informal sector workers. The programme has been successfully deployed in India, Kenya, Ghana and other countries, prompting the introduction into Nigeria.
To ensure that the programme meets public expectations, PenCom along side its consultations and dialogue, has established a special function unit to drive the plan.
It was gathered that in a bid to ensure effective implementation of the micro pension initiative, PenCom had segmented the informal sector into three broad categories – The low income earners; high income earners and SMEs, with each of these categories targeted with appropriate pension products and sensitization programmes that meet their peculiarities.
PenCom
PenCom’s Director-General Pension Commission (PenCom) Chinelo Anohu-Amazu, said a lot has been done on the project which has been on for the past three years. She noted that the commission is working assiduously to ensure robust technological platform is put in place to drive the initiative, adding that special mobile phone applications that had been successfully implemented in some jurisdictions for financial transactions including provision of pension services to the self-employed and informal sector workers could be adopted to prop the plan.
“It is evident that a robust technological platform that would support the provision of customer services is necessary to effectively and efficiently register, collect contributions, provide Retirement Savings Account support, pay benefits and provide financial advisory services to this class of workers.
“Coincidently, special mobile phone applications had been successfully implemented in some jurisdictions for financial transactions including provision of pension services to the self-employed and informal sector workers. The success stories of these applications drives the confidence that similar platform can be designed and implemented in Nigeria,” she said.
She noted that the commission is determined to get the workers into the scheme, stressing that in spite the challenges, those workers who are active now have to be helped to save for the future.
“Micro-pension is the main big push for now. Over the years, people have questioned our sanity in trying to go into the micro-pension, but because the bulk of Nigerian population, resides in this region, we are clear in our minds what will happen if this segment is neglected.
“Yes, it is not going to be easy, but we are determined and will ensure that Jose in the it own employment and are working hard every hour of the day are given cover and encouraged to save for when they would no longer be able to work.
“It is going to be a very challenging exercise, but I am sure that with the supports of all stakeholders and the blessings of the Almighty God we will conquer,” she said.
She canvassed the need to save, stressing that for those who think they are unable to save due to low income, would still find it difficult to save when they have more, adding that saving requires discipline.
“If you can’t save N10, you can’t save a billion. That is the truth. Any which way you look at it, if you think your fund is too small to be saved, when you have it increased ten million folds, you can’t save. This is the fundamental principle when it comes to money. So, no amount is too small to be saved,” she posited.
At one of the workshops organised for Self Employed Tailors and Garment Workers in Lagos, Anohu-Amazu said the Federal Government planned to bring the over 50 million workers in the informal sector into the CPS using the Micro Pension initiative.
She said Government hopes to bring at least 20 million informal sector workers and self-employed persons into the Scheme in the next four years and assured that necessary arrangements were being put in place to ensure a smooth take off of the Scheme later this year.
“Take care of your financial needs in old age now that you are working, not later. Whatever you gain here please share with your colleagues at the branches and local units,” Mrs. Anohu-amazu admonished.
Also, the Head of Research and Corporate Strategy Department at PenCom, Dr. Farouk Aminu who presented a paper titled “Contributory Pension for Self Employed Tailors and Garment Workers” reviewed extensively the features of the CPS and the Pension Reform Act, 2014 with emphasis on coverage, access to retirement benefits under the scheme and the Pension Protection Fund (PPF).
He assured the workers that PenCom understood that the informal sector is characterised by the absence of formal structures, low and irregular incomes earned by workers except those on fixed salaries, highly mobile and flexible jobs, lack of permanent work address in many instances and is ready to ease the stress associated with registration and participation for the target workers.
Dr. Farouk said the above peculiarities require special registration and customer service platforms even as the Commission is anticipating erratic contributions, remittance and withdrawal arrangements.
PenCom, he added, hopes to make the scheme flexible to accommodate workers in the informal sector and self-employed persons, adding that the Commission is ready to partner trade associations, Non Governmental Organisation (NGOs) and religious bodies to make the Scheme work, he added.
The Head of Research and Corporate Strategy at PenCom also highlighted some of the benefits that self-employed people and workers in the informal sector could reap by participating in the Scheme saying in addition to providing them income in their old age and inculcating a savings culture through highly protected and regulated investment, the scheme would afford them the opportunity to connect to other programmes of government while helping to finance infrastructure across the country.
They could as well use the balance in their Retirement Savings Accounts (RSAs) as equity contribution for residential mortgages and support their businesses and benefit from other micro-credit schemes and special awareness programme affiliated to the scheme, he said.
He stated that additional benefits to self-employed persons and informal sector workers include the cover provided under the Pension Protection Fund (PPF), explaining that under this arrangement, Government would bridge shortfalls or financial losses from investment of their accumulated retirement savings and guarantee them minimum pension in retirement, irrespective of how much they are able to save before retiring.
This initiative will be funded by an annual subvention of 1 per cent of monthly wage of Federal Government employees, annual levy on PenCom and pension operators as well as pension fund investment income, he explained.
PenOp
The President, Pension Fund Operators Association of Nigeria (PenOp), Eguarekhide Longe, said the operators are anxious, to get the workers into the scheme, stressing that Micro-pension remains one of the key focal points for development over the next 10 years.
“The operators are anxious, I do not know about preparations. If you look at the informal sector, you will observe that, players in that sector cannot be approached like the formal sector.
“A lot of background works have to be done and that is one of the concepts that was extensively discussed during the last pension industry retreat. Micro-pension remains one of the key focal points for development over the next 10 years. That is where the figure of 20 million subscribers was set as target for the industry.
“For me, micro-pension and the informal sector are not the same, and I will explain. Micro-pensions really looks at small investors – small savers. Informal sector is not necessarily limit to small investors.
“A micro-pension is a sub-sector of the informal sector, because most small investors are in the informal sector. You may be looking at an artiste like Davido as an informal sector participant, Mikel Obi as a participant in the informal sector to a certain degree. The informal sector for me is categorisation, incentive and structure.
“The structure as to how you are going to harness those funds. How are you going to collect contributions from that growth in compliance, from 5 million to 20 million? You have to put technology in place to be able to harness that growth. Those are the things we had focused on.
“We had actually advanced to certain degree and we had discussions on what need to be done. There is also the structure which is the type of guidelines we can use to approach this market. We probably have to create a separate fund for informal sector subscriptions because most of the people in the informal sector, mostly micro-pension people always have a liquidity need. So, we do not want to include them in the same pot as the informal sector workers.
“There is also the fact that they want a different way of accessing their benefits. They probably want what we might call a guarantee return on their contributions. These are all the issues that need to be dealt with and I think that we are rapidly dealing with them. I recall, we have an eighteen month implementation plan to sort these things out, but another critical area is the area of the awareness. The kind of material you use to create awareness for the informal sector is extremely different from those in the formal sector.
“All these are in process and there are champions that have been appointed to take these forward, both on the operators’ side and on the side of the regulator. We are going to see increased activities in that area and we hope for better compliance in the next 12 to 18 months,” he said.
Determined to accommodate the workers that are presently outside the Contributory Pension Scheme (CPS), PenOp amongst other strategies has commenced training operators for the enrollment of workers from the informal, private and public sectors.
The training which is organised in collaboration with PenCom is aimed at equipping the operators on key procedures such as, basic calculation of fund pricing, differences between Programmed Withdrawals and Annuity, death benefit requirements and new initiatives in the sector.
The trainings which have held in Lagos; Abuja and PortHarcourt, provided opportunities for the workers to share knowledge and initiate measures to tackle challenges affecting their operations.
PenOp maintained that the training and other measures adopted by the association are geared toward making adequate provisions for workers that are presently covered in the scheme and those that will be integrated through recent initiatives taken by PenCom and the association.
“We are aware that there are approximately 176 million in this country and about 70 million people in the workforce and currently we have about 6.4 million in the contributory pension scheme.
“The Pension Fund Operators Association of Nigeria (PenOp) recently concluded its customers service training that held in PortHarcourt, Abuja and Lagos and was attended by key staff of all the operators in these three regions.
“It was extremely exciting and interactive. The focus of the training was to build the capacity, knowledge base and confidence of the staff, especially those who are at the front line in the organisation they work for.
“The pension industry has seen changes, especially in the Pension Reform Act 2014, which came with changes in procedures, required documentation and different issues.
“We felt that it was important that all the representatives, staff who have face to face contacts with customers and the general public on a daily bases are brought up to date regarding all the changes, processes, and documentations required. We do not want any of them to offer sub-standard customers service, hence the need for the training,” it said.
PenOp said the training was designed to prepare the operators on how to offer excellent services to their clients.
“The pension industry is still growing and we know that now is the time to inculcate into the system the need for operators to treat their clients well, keep them informed and ensure that all their enquiries and needs are met. That was the the essence of the training.
“To make the training more in-depth, for the first year ever, the National Pension Commission (PenCom) was invited to attend the trainings in the three locations. PenCom was there to training the attendees on how to provide excellent customers service in retirement benefits administration. This is because, that is the high point of the pension system – what people get when they retire,” it said.
It stressed that the knowledge obtained from key procedures such as basic calculation of fund pricing, differences between Programmed Withdrawals and Annuity, death benefit requirements and more, will impact the industry positively, adding that there was robust question and answer sections, where challenges were raised and discussed in a spirited environment.
It said the attendees were pleased with benefits they derived from the training, stressing that the effort goes to show that PenOp is not resting on its oars.
The leadership of the association said they recognize the fact that there is a lot of grounds to cover, and so, they are preparing their people for times such as the opening of the doors of the the informal sector.
They maintained that prior to when the gates would be opened, the operators want to be ensure that they are prepared, knowledgeable to meet whatever enquiry and provide the services that are required.
Workers
The workers in the informal sector have demanded for a window that would enable them get soft loans for the purchase of machines and equipment from their savings.
They also want PenCom to clarify the minimum and maximum entry age for self-employed persons and informal sector workers under the CPS as well as how much and at what intervals they need to make contributions into the scheme.
They were also worried about the mode of payment of pension to them wondering “how can we access our pension when we retire,” adding “We don’t want to stand long hours on queues or suffer the fate of pensioners under the residual defined benefit schemes.”
They said they would not like their accumulated saving and interest thereon taxed and would appreciate it if government could incorporate health insurance and loans scheme into the programme as well as making it possible for part of their pension saving to be used to provide them machines and equipment among other things.
President of the Nigerian Union of Textile, Garment and Tailoring Workers of Nigerian (NUTGTWN), Comrade Oladele Hunsu, called on PenCom to ensure everything required to safeguard the funds of the workers are properly put in place.
The General Secretary of the union, Comrade Issa Aremu recalled that National Provident Fund (NPF) that was established to provide pension for workers in the private sector was scrapped because of its shortcomings. Also, the Nigeria Social Insurance Trust Fund (NSITF) that was set up in 1993 was sabotaged paving the way for the establishment of the Contributory Pension Scheme for workers in the private and public sectors in 2004.
He also noted that the Pension Reform Act, 2014 extended the coverage of the Scheme to self-employed people and workers in the informal sector including the over 10,000 Tailors and Garment workers across the country.
Conclusion
Whilst PenCom has maintained that embracing the scheme would enable self-employed people and workers in the informal sector have sufficient income at old age, and also help inculcate savings culture through highly protected and regulated investment and afford workers the opportunity to connect to other programmes of government while helping to finance infrastructure across the country. The desire of the workers must be properly looked into.
Documentations and accessibility to the funds should be made flexible to enable more workers embrace the scheme.
Moreso, workable technology should be deployed for easy collection, remittance and payment of benefits.
