Nigeria is number 41 of 43 countries in the recently released Mercer CFA Institute Global Pension Index 2021. Our retirement income system ranks second lowest in Arica and closes to the bottom in the world.
The global pension index is a combination of three weighted factors: adequacy (benefits paid), sustainability (ability to keep paying), and integrity (confidence in the system). Nigeria ranks 19th globally in sustainability, 41st inadequacy, and dead last (43rd) in integrity. This brought our overall ranking to 41st.
There are three common sources of retirement income. These are the government, the employer, and the individual’s own savings. The first two are often not enough while the third requires education, effort, and discipline.
To improve the retirement system, a bill has been passed in both the Senate and the House during the Obasanjo era. Now what can also help is the need for we can call “: Capital Market Development Act” The proposed Capital Market Development Act should focus on helping workers prepare better for retirement by allowing portability of benefits, encouraging savings, expanding their investment product choices, promoting financial literacy, among other initiatives.
This is encouraging. Realistically though, this will take longer to materialize and there is no guarantee that the enhancements will be enough. But in retirement planning, time is so critical.
This is where employers can play a vital role given that employees spend the greater part of their lives working for a company. Companies say people are their greatest asset. One way to show they care is to help employees prepare for their retirement. Many provide retirement benefits higher than mandated by law. But simply providing the benefit is not sufficient to ensure the employees can look forward to happy days during their sunset years.
We hear many sad stories about retirees. Those who spent all retirement benefits in just a few years and had to work again. Those who went into business and failed. Those who got scammed. Those who could not afford proper medical care. Those who depend on their children who are already raising their own families. These are tales of discomfort and the absence of dignity. Stories that could have been prevented with some help from their employers.
There are a good number of simple and effective steps employers can take to inspire employees to prepare for life in retirement.
— Improve employee financial literacy through awareness campaigns and education via frequent company communications and annual sessions on personal financial planning.
— Orient new employees early and well to the retirement plan so they appreciate it better to participate and contribute more.
— Include a segment about personal budgeting during company or department annual planning because individuals also need to allocate resources efficiently like companies.
— Increase personal financial planning awareness during times of bonuses and sustain this by building a culture for preparing and risk-proofing the future.
— Offer a more detailed retirement planning session for those at least five to 10 years to retirement, so they can put in place a more robust plan to ensure their readiness.
— Conduct a retirement session for those about to retire so they can have a smooth transition for the expected big change in their lifestyle with a lot of free time, limited interactions with former colleagues, and no more set goals to achieve.
— Create an automatic savings and investment program for employees to encourage them to develop the habit early and to enable them to maximize the benefits of long-term saving and investing.
— Use income and loan data of employees, without violating privacy rules, to spot those who may need more financial education or support. Employees with big loans or habitually applying for one can be a symptom requiring some attention.
— Offer a more flexible set of benefits so employees can fully maximize them and help reduce their out-of-pocket expenses, which can improve savings.
— Review and promote programs that support a well-funded employee retirement like contributory plans, stock purchase plans and stock options.
Ultimately, it is the individual who has the primary responsibility for retirement readiness. But employers can extend more help, guidance and support for their people in this effort. I am certain that the care for employees goes beyond employment, especially when we appreciate our staff as people and not mere statistics.
Add a Comment