The immediate past Director-General, Lagos State Pension Commission (LASPEC), Mrs Folashade Onanuga, noted, to address the challenges of the Contributory Pension Scheme (CPS), the National Pension Commission (PenCom), Pension Fund Administrators (PFAS), and other stakeholders in the administration of pension funds should consider the basic needs of contributors.
She described the basic needs, which must be considered with inflation so that consumers could get the benefits that the scheme was created for.
Onanuga stated that because of the economic pressures, many people are more open to the possibility of withdrawing their pensions savings.
She asked, Is there a way to adapt this request? If, for instance, employees with Retirement Savings Account (RSA) balances of less than a certain amount are allowed to withdraw their pension savings, what is the rationale for locking others in?
“Can we include penalties for early withdrawals? Can incentives like basic healthcare levels be offered to encourage clients to remain with their pension provider after they retire? Are there opportunities to offer clients more within the ambit of the law?
“Such flexible options will give clients of pension funds more control over their future while also catering to the profit motive of operators. When pensions products are demanded by the average Nigerian worker either in the formal or informal sector and not impressed on them, a major milestone in financial inclusion would have been achieved.”
She commended PenCom for its tremendous progress in the last 17 years in the industry, with regulation as an enabler for growth. However, inclusive growth in pensions must recognise the peculiarity of the population segment being addressed.
“This recognition must have an impact on how products are designed and how lower-income segments of the population interact with pension funds. Considering what happens in developed economies, there are different kinds of plans to meet different needs.
“There is also a trust gap to be bridged in the pensions industry despite the potential benefits of the product. PenCom, as the regulator, needs to take more advantage of digitisation in pension operations to make transactions easier and more accessible.
“In this, we can take a page out of what the banks have done to provide banking services to lower-income population groups. Structures must be in place before the release of pension laws to ensure that all aspects of the Law are implementable,” Onanuga said.
.According to her, the scheme has done more good as it has allowed incredible mobility for employees in the formal sector, simplified the administrative processes, and drastically reduced fraudulent practices in pension scheme administration.
But, she noted that the scheme is yet to fully address the issue of ensuring that retirement benefits are paid as at when due, especially where benefits accrue to workers under the defined benefit plan.
“Pension benefits, as received by many in the CPS dispensation, have been considered very inadequate to give comfort in old age. While we would like greater participation from state governments and small/medium-sized corporates, that is not something we can boast.
“Today, pension funds under management are over N13 trillion with enrolment less than 10million registered contributors. With the inclusion of the informal sector under the micro pension plan, this can be much higher. However, we must understand the needs of the population group we want to serve. We cannot use conventional products with this market segment. In addressing these needs and concerns, we will be doing our part to create lasting economic change in Nigeria.
“Consequently, the opportunities which exist for increased financial inclusion in both the insurance and pension sectors will only be achieved if we design products that are perceived to meet the people’s needs and could be seen as improving their welfare rather than impoverishing them. Operators must be engaged in strategic thinking, have a broad understanding of the country’s economic situation, understand the mindset and ways of life of different ethnic groups, and then have a variety of products from which the people can make a choice,” Onanuga added.
