Nigerian millennials may not be taking retirement savings seriously. The latest release from the National Bureau of Statistics reveals that out of the 7 million plus Nigerians that are currently contributing to the Pension Scheme as at December 2017, only 700,000 are below 30 years. This compares to the 51 million Nigerians currently employed as per NBS jobs report for Q3 2017.
Based on the above data about 15% of Nigeria’s working population have pension accounts and contribute part of their salaries as pension. The gap between those with pension accounts and those that do not is a whopping 85%, highlighting how much potential we still have to grow our pension funds.
A deeper review of the Pensions data, however, reveals a more interesting data which we want to focus on. The age distribution of Nigerians.
What the report reveals
- The private sector leads the way with pension contributors for this critical segment of society.
- In fact, out of the 7.8 million Nigerians with pension fund accounts over 1.8 million work in the private sector.
- Federal and State Government have far fewer workers under the ages of 30 working for them, indicating that their workforce is fast ageing.
- In about 10 years from now, the Federal and State Government will have nearly one-third of its workforce closer to retirement
- State Government seem to recruit more women compared to any other workforce in the country. They had 44% of the workforce as women compared to 27% in the Federal Government, 25% for the Private sector and an average of 29% in general.
- There are about 176, 259 Nigerians set to retire and stop contributing pension monthly
- More importantly, about 3.6 million Nigerians or 46% of pension contributors are aged below 40 years.
- Perhaps the most worrying revelation is the fact that only 730,200 Nigerians or 9% of contributors are aged less than 30 years. Thus, younger Nigerians or Millennial currently make up a small percentage of pension contributors.
Why is this important?
- When it comes to pensions, the younger your workforce the less pressure you have on your pension fund and the more helpful it can be for the economy.
- Economies with ageing workforce tend to face more pressure on their pension funds as it means they have more people taking out of the fund than contributing.
- This places pressure on the fund managers to grow the fund so it can meet its obligations forcing them to often take risks that could negatively affect the financial health of the fund.
- Another important revelation from this report is that the government will need to review its employment policies in the near future it is to remain efficient.
- Younger Nigerians need to make up a larger percentage of pension contributors for our pension model to remain sustainable in the future. At 9%, their proportion of contribution is paltry and has potential to grow.