Efforts by the National Pension Commission and other stakeholders through radio jingles and other enlightenment campaigns seem to be yielding results, as more and more Nigerians are joining the bandwagon of pension participation. Analysis of recently available data shows that 158,853 more Nigerian workers registered to participate in various pension plans in the first three months of 2019.
As at the end of the year 2018, a total of 8,410,184 Nigerians had enrolled into the Nigerian pension schemes overseen by the National Pension Commission. Three months later (i.e., March 2019) that number had increased to 8,569,037; indicating that an additional 158,853 had joined the league of pension fund participants. That comes to an average of 32 thousand additions every month. That is not too bad for a country with a huge unemployment rate.
Age Grade Analysis: Age grade analysis of the data shows that a greater percentage of the increase came from those within the 40-49 age range, followed by the 50-59 range with additional 60,341 and 32,546 participants respectively. Unfortunately, and seemingly regrettably, the younger ones are the age grade with the least pension participation growth rate.
According to the data, only 9.5% of pension participants are less than 30 years of age while those within the age bracket of 30-39 make up 36%. In terms of growth, those two age grades registered the least amount of growth. Among those less than 30, 12,761 new people registered in the quarter, while 14,873 new registrants came from the age grade of 30-39.
Gender Analysis: Differences by sex in pension participation remained significant. It does not look like the gap is narrowing anytime soon. Our gender analysis has it that twice more men registered than women. Specifically, 108,173 additional males registered within the quarter, compared to 50,638 additional females. That brings the total number of men participating in the pension scheme to 5.9 million while 2.5 million women are also participating.
Gender equality as a challenge confronting pension system is, however, not peculiar to Nigeria, indeed, it is a challenge around the world even as more and more women all over the world enter, participate in, and/or exit the labor market.
It is hoped that the increase in pension participation among women will increase at a faster rate as their labour force participation increases due to their increasing higher level of education and increasing incidence of single motherhood. Women should be encouraged to participate more, at least for the reason that women tend to live longer than men.
Early Participation and the Power of Compound Interest: Saving for retirement serves two major purposes; it helps to smoothen consumption pattern and to prevent old age poverty. Old age poverty is a scourge in Nigeria and participation in pension schemes can help alleviate the problem. The need for early retirement savings participation cannot be overemphasised. If there is any place where the phrase, “early to bed, early to rise” has a financially beneficial effect, it is in retirement savings.
A lot of young people are making the mistakes some of us made in the past, by not starting to save for retirement early. The earlier you start; the more money you are likely to starch away prior to retirement and hence, the more comfort you will enjoy upon retirement.
How much you have at retirement depends on three major factors: the amount invested or contributed, time, and compound interest. All things being equal, if you contribute N1,000 every month from age 25 to 35, a period of 10 years, in a fund that yields 7% (a rare feat though), you will have more than N1.4 million at age 65. On the other hand, someone who contributes the same N1,000 from age 45 to 55 (the same 10 year period) at the same annual rate of 7%, will end up with about N375,000 at age 65.
Although a retirement savings of N1.4 million or N375,000 will be grossly inadequate at 65, this illustration underscores the urgent need to start saving early for retirement as such habit has the tendency to exponentially increase your retirement savings balance.
So, if you do not start early, you reduce or even lose the benefits of time and compounding and you expose yourself to the pressure of playing catch up, if you can.
Never too Late: If you are reading this article and you are already participating, good job. Note that you can always increase your monthly contribution to maximize your outcome.
However, if you are reading it and scratching your head because you have not yet started saving for retirement, it is not too late yet. Start now and resolve to make up for the lost years by saving even more on a monthly basis.
Do not wait until you are comfortable financially to start to save. Forgo some of today’s luxury for tomorrow’s comfort. Do like the Richest Man in Babylon suggested; when you get your monthly salary, pay yourself first by saving before paying others by spending. Good luck as you take those bold but unpleasant steps to retirement savings.