The micro pension scheme is growing at a faster pace than any other type of pension fund in Nigeria as more Nigerians think about and consider retirement.
The various pension asset summary reports issued by the National Pension Commission (PenCom), and analysed quantitatively by Quantitative Finance Analytics, show that Nigeria’s traditional pension assets have increased marginally of 0.75% from N12.31 trillion on December 31, 2020 to N12.4 trillion by April 30, 2021.
Analyses show that fund 1’s net asset value increased by 12.21% while funds 2 and 4 saw their net assets increase by 1.67% and 3.81% respectively. Funds 3 and 4 however, experienced a decrease of 1.12% and 1.12%, respectively. Fund 5, the micro pension fund, saw a staggering 58.65% increase.
At the end December 2020, assets in micro pension funds stood at N74.65 millions, but this figure had risen to N118.43million by April 2021.
Additional information is required
Despite micro pension funds growing rapidly, there is not much data or information available. Only a handful of micro pension funds publish their prices, unlike the “conventional”, which have fund managers publishing price data on a daily or weekly basis. The available data shows that all micro pension funds generated positive returns in 2021, contrary to the “conventional”, which has had a mostly negative year-to-date performance in 2021.
Contributions and registration
According to the National Pension Commission, 19 Pension Fund Administrators registered 3,292 micro-pension contributors in the first quarter 2021. N16.7 million was remitted in the same time period to 435 micro-pension fund contributors’ Retirement Savings Accounts. What is growth if this isn’t it?
Conversion to traditional pension funds
Micro Pensions in Nigeria have the good news that contributors can convert into Mandatory Contributory Pension Schemes after they meet certain conditions. In the first quarter 2021, 105 participants in Micro Pensions converted to Mandatory Participtory Pension Schemes. This involved the transfer N963,136 to their respective Retirement Savings accounts.
PenCom facilitates further growth
This remarkable growth will be further supported by the National Pension Commission’s recent changes to the fee structure for micro pension funds. The expense ratio or fee structure of funds is one of the main factors that discourage people from investing in fund investments, whether they are mutual funds or pension funds. PenCom’s recent reduction in the fees charged on micro-pension funds will encourage more people to sign up, which will accelerate the growth.
It all comes down to this:
This phenomenal growth shows that small- and self-employed people should start saving for retirement. Time is crucial when investing. That is the lesson that compounding magic has taught us.
It is safer to invest your money with a government-regulated entity that is overseen than with private Esusu’ organizations, where the risk of losing is high and there is no return other than principal recoupment.