At the backdrop of heightened economic hardship subscribers to the micro-pension scheme have began to draw down on their contributions through contingency withdrawals.
The micro-pension plan, MPP, was created by the National Pension Commission to encourage low income group, mainly self employed and informal sector workers, to have a pension savings for their old age.
Financial Vanguard findings from pension data show that the contingent withdrawals by micro pension contributors in 2023 skyrocketed by 245.2 per cent to N21.4 million from N6.2 million recorded in 2022.
Also, the number of contributors that made contingent withdrawals increased by 68.4 per cent to 64 in 2023 from 38 recorded in 2022.
Contingent withdrawals is that portion of the Retirement Savings Account, RSA, balance made available for withdrawal to ease financial pressures or needs of the micro pension contributor before his/her retirement.
The sharp rise in contingency withdrawals is coming at the backdrop of underperformance being recorded in the low income pension category, with the target enrollments completely off plan.
The scheme, one of the most strategic financial inclusion measures of the Federal Government packaged and implemented by the National Pension Commission, PenCom, had envisaged to enroll about nine million registrants by 2023, however only 114,382 contributors were registered as at end of 2023.
The data also show that total pension contributions to the micro pension stood at N680.2 million as at December 2023.
Consequently, as the economic hardship continues to bite harder, some micro pension contributors are taking advantage of the contingent withdrawal option of the plan to withdraw from their pension savings.
Meanwhile, quarterly breakdown of the withdrawals in 2023 show that micro pension contributors withdrew N2.98 million in Q1’23.
The figure went up by 3.7 per cent to N3.09 million in Q2’23 and in Q3’23, the figure further increased by 238.5 per cent to N10.46 million, but dropped in Q4’23 to N4.87 million, a 53.4 per cent decline.
Experts’ insight
Speaking on the development, Executive Director of the Center for Pension Rights Advocacy, Mr. Ivor Takor, stated that the rise in the withdrawals of pension savings could continue except government fixes the economy for the better.
He said: “The contingency plan is just part of encouragement for the contributors to know that if they are passing through any challenge, they can withdraw from the contingency plan.
“And the economy, like all of us know, is so bad, so the contributors cannot have that money standing there and they are dying of hunger or sickness.
“What the government can do is to fix the economy and do things well so that people will begin to have a meaningful life because even those of us who are working you cannot be having challenges and you have money in your savings account and you will not go for it. It is expected anyway, and the trend could continue. It can only improve and get better when the situation and welfare of citizens is better.”
Also speaking, Managing Director of Achor Actuarial Services, Mr. Pius Apere stated that the MPP is designed to bring the self employed members of the public into the pension system with a view to safeguarding them from retirement age poverty.
Apere said: “The government must do all within its power to turn the economy around for the better to prevent further withdrawals from pension savings. An average Nigerian must have one form of pension scheme or the order; formal or informal and the micro pension plan can help us to include more Nigerians in the financial safety net. Micro pension can be made a big deal in Nigeria”.
According to the Director-General, PenCom, Mrs. Aisha Dahir-Umar, “The implementation of the micro pension plan will improve the standard of living of the informal sector participants at retirement and reduce dependence on extended family for support at retirement.”
She noted that the self-employed people and workers in the informal sector could reap financial and economic protection by participating in the plan, as the initiative will provide income at old age and inculcate a savings culture through highly protected and regulated investment.