When I was in my twenties, I did not give any thought to retirement. It’s not something that crosses the mind when sitting at your desk on a Monday morning as your work week (and years) seem to stretch far ahead of you, never ending. The drudgery of the day to day job fogs up thoughts of a future without work.
My recollection of pensioners is the image of worn, old men in front of the Military Pension Board, huddling under trees to escape the hot Abuja sun. During my NYSC year, I walked past them every month on my way to sign for allawi. They clutched their tattered, carefully put together documents, waiting months for payments that rarely came. I looked at them and sighed but I was far removed from them, the gap in our ages and circumstances a wide gulf.
I always opted out of work pension schemes, confident that I could spend the money in better ways than saving up for some vague finish line decades before me. A marker of the millennial generation is that we can no longer count on a job for life. So why have a pension when I was just going to move on after a year, I thought. Why not spend it the way I see fit?
With age comes a painful clarity. I see now that I was silly not to stay in my work pension. The money I thought I was saving is nowhere to be found. I am now in my mid-thirties and, in the last year, have only started taking retirement seriously. I had started contributing to a work pension but gave no further thought to how much my contributions would get me at retirement. And then I listened to a Freakonomics Radio episode “The Stupidest Thing You Can Do with Your Money.” It was about investing in Index Funds but more relevantly, it got me thinking about my retirement. How much had I saved, what had I done to plan for it? Would it be enough to maintain the current life I have? The general rule is that you should start putting away money in your 20s because you have to save a higher proportion of your pay if you start in later years. I had nothing from my 20s apart from a N10,000 investment I had made on a whim and is now worth less than the paper the certificate was printed on.
What was once a deep, impassable gulf between me and the military pensioners, began to feel like a shallow puddle that could be hopped over easily. The looming spectre of 70-year-old me begging my siblings for money seemed all too real.
Only 8.1 million Nigerians – 4% of the population – have a pension. That leaves too many Nigerians without a pension or firm plans for retirement. The Nigerian government does not provide a state pension, where the government provides a monthly or weekly payment to anyone who makes it to the state pension age. They, instead, encourage employers to provide private pensions for their employees and match their contributions. For those outside of the corporate sector, the government has recently introduced a Micro Pension plan to cater for the informal sector, like traders, farmers and SMEs.
I understand people’s reluctance to invest in a pension. I worked for an organisation that made deductions from our pay but never remitted it to the pension funds administrator. They also rarely paid salaries on time, not a coincidence. Nigerian financial institutions can be notoriously unreliable which doesn’t inspire trust that the money you put in will be recoverable in 40 years’ time. Pensions can also give a poor rate of return, sometimes lagging behind inflation figures.
But you do need to save.
It doesn’t have to be in a pension, but it should be in a vehicle that works like one. One that you can’t access before retirement and guarantees you a certain amount of money to maintain your lifestyle in your late 60s, 70s and even 80s. The sum total of the retirement plans for many Nigerians is an unreliable investment portfolio of hoping to “hammer”, a spouse or children. But as Mary Schmich says “Don’t expect anyone else to support you. Maybe you have a trust fund. Maybe you’ll have a wealthy spouse. But you never know when either one might run out.”
Realistically, the foundation of a peaceful retirement will be built on money ferreted away slowly but consistently. Or in a significant investment such as a house, land or a business.
After my wake-up call, I started consciously saving more. I still contribute to my workplace pension, but I also invest in the stock market using index funds. I make additional contributions to a private pension. Despite our low life expectancy, you could feasibly end up living for almost two more decades after retirement. The youthful years that seem to stretch out before you now will inevitably be replaced with years of old age, and without a retirement plan, little income.
Sort it out.