The Contributory Pension Scheme (CPS) is a vital initiative empowering individuals to secure their financial well-being in old age. Tailored initially for formal sector employees, the CPS was extended to include informal sector workers following the Pension Reform Act (PRA) amendment in 2014.

Guided by the provisions of the PRA 2014, the National Pension Commission (PenCom) introduced the Micro Pension Plan (MPP) with the specific objective of broadening pension coverage to include workers in the informal sector. Under the MPP, private sector organisations with less than three employees and self-employed individuals can participate in the CPS.

In 2022, a survey conducted by the Small and Medium Enterprises Development Agency (SMEDAN) in collaboration with the National Bureau of Statistics (NBS) indicated that Nigeria is home to an estimated 39.65 million Micro, Small, and Medium Enterprises (MSMEs), responsible for employing 87.9 percent of the nation’s labour force. Furthermore, a 2021 report from the World Bank Group, titled ‘Long Shadow of Informality: Challenges and Policies,’ projected that 80.4 percent of employment in Nigeria is concentrated within the informal sector. Therefore, for the CPS to impact old age poverty in Nigeria, it must cover workers in the informal sector.

Before the introduction of the MPP, workers in the informal sector, as well as those in organisations with fewer than three employees, were not covered by any retirement benefit scheme in Nigeria. The introduction of the MPP by PenCom is a concrete step that aims to bring pension services to workers in the informal sector during their retirement years.

New MPP participants must register with a Pension Fund Administrator (PFA).

This involves opening a Retirement Savings Account (RSA) by filling out a registration form. Upon registration, the MPP participant receives a Personal Identification Number (PIN) from the PFA and is ready to start making pension contributions. Eligible participants include self-employed individuals affiliated with trade, profession, cooperative, or business associations, those with business name registrations, partnerships, or enterprises, informal sector employees with or without formal written employment contracts, and other self-employed individuals aged at least 18 years who reside in Nigeria.

It is crucial to note that the Micro Pension Contributor (MPC) becomes eligible to participate in the mandatory CPS upon securing formal sector employment with an organisation employing three or more individuals.

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