Pension Fund contributors aged less than 30 years now make up a smaller number of pension contributors, going by the data released by the National Pension Commission. The data reveals only 803, 895 of those less than 30 years and younger or 9.56% now make up total pension fund contributors. It was 9.33% at the end of 2017.
Data from the National Bureau of Statistics shows total Pension Fund Assets closed at about N8.6 trillion at the end of 2018. Contributions via the Retirement Savings Account (RSA) was about N6.5 trillion or 76% of total assets.
RSA Growth: Under the retirement savings account scheme, employees and their employers by law are mandated to contribute about 8% and 10% respectively of, at least, their basic housing and transport allowances. This requirement has helped increase the size of pension contributions from about N15.6 billion in 2004 to about N5trillion as at December 2018. Total returns less payments and fees is about N1.5 trillion.
One of the reasons for the nearly 326 fold increase in contributions is due to the increase in employees who now contribute to the scheme. For example, active members have risen from 4.7 million people in 2010 to 8.4 million people in 2018. Contributors of 50 years or younger were 4 million with those 30 years and below now 1.3 million. However, for younger contributors, the trend is reversed.
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An alarming trend: A flashback to 2011 data of the pension commission reveals contributors less than 30 years were about 1.3 million, representing 28.4% of total contributions compared to 803, 895 as at the end of the 4th quarter of 2018. Now those who were 22 at the time are now over 30 years but less than 40. Looking at the data again reveals those aged between 30 and 39 years are now slightly over 3 million compared to 1.6 million in the first quarter of 2011.
However, the data is suspect when you dive further into the 2013 and 2014 data. According to data from Pencom, contributors under 30 were 1.9 million as at the end of the third quarter of 2013 only to nosedive to 777,528 contributors by the end of the first quarter of 2014. We did not see the data for the 4th quarter of 2013.
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What does this imply?: A cursory analysis of this data suggests that most Nigerians under the age of 30 remain unemployed or are underemployed. Those employed may also be working in organisations that can’t afford to contribute 10% of emoluments as pension. These are those often referred to as Generation Z, the tech generation who are expected to lead Nigeria into the next industrial revolution.
Unemployment data reveals the same: According to the NBS data, youth unemployment rate (15-34 years) stood at 29.7% as the third quarter of 2018. Underemployment for the same population recorded 25.7% bringing in to a total unemployment and underemployment rate of 55.4% highest of any other age group,
Should we be worried: The way pensions are designed, the younger your contributors the better the pension funds. This is because younger people contribute for longer periods, ensuring that pension fund assets are robust enough for investments. With younger people now comprising much less, the pressure is now on those aged 40 years and above to sustain Nigeria’s pension fund industry.
Where are they now?: Younger Nigerians frustrated out of the job market and facing a bleak future have resorted to fleeing the country for a better life abroad, particularly in Canada. There they find jobs that help them pay their way into better education giving them an opportunity to live a more rewarding life. Those who remain are either seeking a way out of the country, holding on to low paying jobs or unemployed.
The upshots: Nigeria faces a looming crises, with its generation Y and Z and the centre of it. No country can survive without a young workforce. This is why foreign countries with an ageing workforce create incentives to attract younger immigrants from developing economies. The implication for Nigeria is that its best talents will be lost to developed countries, thereby widening the gap between it and countries it aspires to emulate.
Nigeria’s pension fund contribution scheme, on the other hand, could peak in the next 10 years if this trend is sustained. As the baby boomers, Generation X, and millennials approach retirement, there might be little to none contribution from the Generation Z.