A careful look at the recently released Summary of Pension Assets by the National Pension commission reveals a troubling trend. Not that this trend is new or peculiar to the recently released reports, it has been there, but it was hoped that this would improve or change with the introduction of the multi fund strategy.
However, one year after that introduction, the trend remains and that is what makes it even more troubling. The trend I am talking about is the seeming lack of interest in or silence towards retirement savings by Nigerian youths, the Millennials.
Who are the Millennials?
The millennials or Generation Y (Gen Y) or otherwise called the Net Generation, are those born in the late 1980s and early 1990s. Demographers have come up with some demographic groupings or characteristics of generational cohorts and have come to classify people as belonging to one of the Silent Generations (those born 1928-1945) or the Boomers (those born 1946-1964), or the Generation X (those born 1965-1980), or the Millennials. In Nigeria, some have chosen to call the Millennials, the “Indomie Generation”. For the purpose of this article, Millennials refer to those born in the 1990s.
A disturbing Trend
According to an analysis of the Summary of Pension Assets in Nigeria, less than 10% of those participating in any form of pension savings account are in the Millennial age grade. In a country where a great majority of the population belong to this age grade, a 10% pension fund participation is depressing. As if that is not depressing enough, a look at the total pension assets in Nigeria shows that Fund 1, which is set up especially for the Millennials, accounts for less than 1% of the total pension assets, indeed, it is a sorry 0.17%.
Reasons for the perceived lack of Interest
There may be many reasons for this seeming lack of interest or disdain towards saving for retirement early. One of the reasons may be the high level of unemployment. There is no doubt that the rate of unemployment is high in Nigeria, the crime rate is a pointer to that high unemployment rate. Even those that are employed are under employed, in that they are employed in areas that offer them less than they can accomplish. With such high rate of un-or under-employment, it stands to reason that that pension participation rate will be low.
Another reason that may be contributing to the apathy towards pension participation among the Millennials is what I may call the “burden of life”. The Millennials are burdened with such things as the need to build a house in the village and/or in the city. While that is a noble idea, the Nigerian culture seems to subject people to building huge houses because according to one of my cousins who is building such mansions, “that is what the society demands.” Since you are not erecting the building for society, you should build it in such a way as to have a beautiful place to call home without sacrificing your retirement savings. Another impediment in the wheel of retirement savings participation among the millennials is the need to get married and start a family.
[READ ALSO: Do not make these financial mistakes others made]
This is so much so among the men. With bride prices and other incidentals that go with it, who knows how long it takes to save for marriage expenses. Then comes the thought for cars, and other luxuries that eat into the ability to save for retirement. Nigerians are fond of owning multiple cars or fleet, as soon as the opportunity presents itself. How many cars will you drive at the same time? For those clamoring for large mansions, how many rooms will you sleep in, in one night? If all you need is one car, why buy two or many? Why not just buy the one car you need and save the rest of the money for those years when your ability to generate income is almost zero?
Poor wage rate also accounts for the unwillingness, on the part of young workers, to save for retirement because there is that thinking that since the wage is low or poor, any savings towards retirement will reduce the available resources required to take care of immediate financial needs.
Time is money
As noted in one of my earlier articles, a whole lot is lost by not starting to save early. So Nigerian Millennials, do yourselves a favour, open a retirement savings account today and start saving for the eventuality of old age and retirement.