Nigeria, like the rest of the world, is getting ready for retirement at a pace that might not meet the need of the future.
In monetary term, the World Economic Forum (WEF) puts the likely gap between the outcome of global efforts at funding retirement and reality of retirement needs at $400 trillion by 2020.
This shows that retirement realities may outweigh retirement preparations and expose elderly persons to financial insecurity in future.
NOMINATE AFRICAN OF THE YEAR 2019
Chief Executive Officer of Principal Financial Group, Daniel Houston, identified poor coverage, inadequate income and sustainability issues as the three key challenges to getting the world ready for retirement and proving financial security for all elderly persons.
Daily Trust’s checks show that these challenges are as true in Nigeria as they are elsewhere in the world.
Poor coverage: While, the WEF was not specific about Nigeria’s share of the $400 trillion pension shortfall by next year, Federal Government’s data show that Nigeria had a pension deficit of over N2 trillion before the 2004 pension reform that ushered in the Contributory Pension Scheme (CPS).
As at 2019, pension assets in Nigeria has exceeded N9 trillion even as accrued rights and defined pension benefits remain serious burden on the nation’s treasury.
Despite rising pension assets from the Contributory Pension Scheme (CPS), retirement insecurity stares at Nigeria with over 90 per cent of the country’s 10 million elderly persons living without pension support.
The National Bureau of Statistics (NBS) estimated that Nigeria has about 69 million workers in the informal sector and these were not covered by any pension plan until recent introduction of the Micro Pension Plan (MPP).
Even with the introduction of the MPP, only about 30 million of the 69 million workers in the informal sector maybe capture under the MPP by 2024 going by a statement released by the spokesman of the National Pension Commission, Peter Aghahowa.
This implies that about five years from now, more than half of the workers in the informal sector may remain without any pension plan in addition to about 103 million workers who are not enrolled on the CPS.
NBS data show that Nigeria has a working population of 111.1 million workers while PenCom’s data show that 8.6 million of the workers have Retirement Savings Accounts (RSAs).
This huge pension coverage gap poses danger for future retirement and financial security in Nigeria.
Inadequate income: The general complaint among pensioners in Nigeria is that pension they receive is poor to meet their needs. The reasons are evident-poor remuneration from which pension saving rates are determined, irregular remittance and job insecurity.
Daily Trust had previously reported how some retirees get as low as N3, 000 per month as monthly pension in some states.
Despite the provision of voluntary contribution under the CPS, many Nigeria’s are reluctant to save for retirement.
For instance, the Ebonyi State Governor, Dave Umahi, suspended the CPS in his state because the workers complained that the monthly pension deductions from their gross salaries reduced their net pay.
Inadequate income is largely because “people simply aren’t saving enough, whether on their own or through voluntary retirement plans in countries where they exist,” Houston observed.
Sustainability issues: Huge monthly pension payments under the defined benefits scheme (DBS) in Nigeria remain unsustainable.
Under the CPS, many RSAs have low balances that PenCom would have to draw from the Pension Protection Fund (PPF) to keep paying such RSA holders pension for life.
However, considering that the Federal Government is yet to put in place the PPF and that PenCom has continued paying retirees with depleted RSA balances show that there is a sustainability issue.
States still reluctant to implement the CPS are grappling with sustainability of the DBS while the usual family support for elderly persons outside pension coverage remains a huge burden on the Nigerians in general.
World Economic Forum White Paper on Pension the introduction of universal pension benefits for all citizens as a means of significantly reducing poverty among the elderly.
“Poverty protection for the elderly should be the minimum requirement for any government’s pension system. It should be the responsibility of the government to provide a pension income for all citizens,” the WEF stated.
OVER 5,000 NIGERIAN MEN HAVE OVERCOME POOR BEDROOM PERFORMANCE SYNDROME DUE TO THIS BRILLIANT DISCOVERY