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LAGOS – It is generally believed that pension or retirement plan is mainly for workers in the formal sector of the economy. This narrative has however changed with the introduction of Micro Pension Plan (MPP) in 2019 and the issuance of implementation guidelines.
The Micro Pension Plan is a retirement savings scheme tailored for self-employed individuals and those working in organizations with fewer than three employees. It allows contributors to make financial contributions towards their retirement or in the event of incapacitation. This innovative pension solution not only caters to the needs of low-income earners but also extends its benefits to self-employed professionals such as architects, lawyers, accountants, artists, and artisans. It also covers associations, unions, cooperatives, trades, and operators of small and medium-sized businesses, among others, who are not in paid employment, making it inclusive and accessible to all who wish to participate. A contributor under the MPP however must not be below 18 years of age and must be a Nigerian with a legitimate source of income.
It is a known fact that the informal sector has its own peculiarities, hence the operation of the MPP is quite different from that of the regular CPS of the formal sector. Unlike the regular CPS whose contribution is received once a month, the MPP contribution is quite flexible. This flexibility, designed by the National Pension Commission (PenCom), aims to encourage broader participation in the MPP.
An MPP contributor is allowed to contribute daily, weekly, monthly, or as may be convenient for him/her. This takes into consideration the volatility of the earnings of workers in the informal sector and what is obtainable in the practical business environment of the informal sector. Contributions can be made into the Pension Fund Custodian’s bank account through various channels, including cash deposits or electronic transfers, payment instruments/platforms, or other financial service agents approved by the Central Bank of Nigeria (CBN)
The MPP’s flexibility extends to accessing pension contributions. Every contribution made by an MPP contributor is divided into two. The first part is called Contingent Contributions while the second part is called Retirement Benefit portion. The Contingent Contribution is 40% of any amount contributed and available for withdrawal for any contingent needs of the contributor. The first withdrawal from this pool will be available only after three (3) months of initial contribution and once every week thereafter. The Retirement Benefit portion constituting 60 percent, becomes accessible only upon retirement, with eligibility set at 50 years or due to health reasons.
Recognized as a remedy for combating old-age poverty, solutions such as the MPP, are quite prevalent in countries like India, Kenya, and Ghana. Just like in these countries, the MPP in Nigeria has garnered substantial momentum, evident in the notable growth in enrolments. According to a recent report published by PenCom, a total number of 16,624 Micro Pension Contributors (MPC) were registered during the second quarter of 2024 by fifteen (15) Pension Fund Administrators (PFAs) bringing the total number of registered MPCs from inception to 143,565 as at 30 June 2024. Furthermore, the total Pension Contributions received from MPCs in Q2 2024 was ₦68,792,772.30. This brought the total Pension Contributions made by the MPCs to ₦860,366,974.72 as at 30 June 2024. No doubt, more people in the informal sector are beginning to recognize the need to secure their old age while they are still in active years.
Veritas Glanvills Pensions Limited (VG Pensions), one of the leading pension fund administrators (PFA) in Nigeria has remained at the forefront of deepening financial inclusion in Nigeria and making retirement planning accessible to all through its innovative and seamless pension services. For over 15 years, the Company has remained committed to providing exceptional client services, efficient benefits administration, easy access to pension savings for residential mortgage, and growth in the pension funds of its clients. The Company’s sustained focus on safe investment activities and decent returns have enabled it to achieve consistent growth in all assets under its management. This in turn has helped its clients who exit from active employment to retire into relative comfort.
