Social security refers to any government assistance through which citizens can receive monetary assistance. Retirement benefits are one of the three types of social security provided by governments across the world.
Unlike the Western world, the majority of African governments do not provide a social security system for the unemployed. This means that to be able to save up for retirement using the government system, one has to be legally employed as your monthly contributions will be taken from your paycheck.
The aim of retirement benefits is to provide a source of income upon retirement. This however is not sufficient if you are in the low or mid-income category. The current situation of pension in Nigeria demonstrates why you should not rely only on your social security to provide for you after retirement.
What is the Current State of Pension in Nigeria?
The number of people contributing to pension schemes in Nigeria was noted to increase by 189,765 between January and July of 2021. This is is a significant improvement particularly in a country where the culture dictates one should rely on God and take things as they come. The shift in attitude can be attributed to the changes brought about by the COVID-19 pandemic which saw millions lose their jobs across the world.
Although pension schemes are experiencing continuing growth, retired pensioners are experiencing trouble as they are yet to receive over 3 years’ worth of payments. State governments such as Kano, Osun, Delta, and Ondo, among others have delayed processing 34 months’ worth of payments to the retirees. This unfortunate state of events, which governments are blaming on the poor state of the economy, is resulting in many of those who have retired dying before receiving a single cent of their well-earned money. Instead of improving their lives, by making them independent individuals, this issue is only serving to worsen the old-age poverty situation in Nigeria.
As the Nigerian pension system follows the defined benefit scheme, it is entirely up to the government to bear the obligations of the scheme and make the payments to all those who have a registered pension scheme account.
How Can Such a Situation be Avoided?
The current state of pension in Nigeria is a clear indication of the importance of being smart and creative about how one can save up for retirement. You should look at your social security account as a supplement to the retirement benefits you will receive after you hit retirement age. This is because by the time you are retiring you will have barely saved enough to cover your important bills as well as maintain the lifestyle you aspire to live.
If you want to ensure you have a comfortable retirement and ensure the financial security of those who depend on you, the following tips might help:
- Ensure you are saving in an individual pension scheme
- Make the most of your employer contribution scheme (if applicable)
- Have a diversified investment portfolio
Summary
As demonstrated by pensions in Nigeria, relying only on social security will likely end in disappointment. This can either result from non-payment, delay in payment, or not having enough money to maintain your ideal lifestyle. To live comfortably, you must ensure you are creative in your saving and investing habits and begin early.
