Pension: Nigeria ranks low globally despite improved pension scheme

Despite the successes being recorded in the Contributory Pension Scheme, CPS, the Nigerian pension sector has been ranked low as it occupies 64th position in the global pension rankings.

According to the first edition of the Allianz global pension report, no African country ranks among the top-10 as pension systems in most of these countries are still in the build-up phase.

The report titled: “Allianz Global Pension Report 2020” stated that Sweden, Belgium, and Denmark come out as the relatively best pension systems worldwide.

According to the report, adjusting the retirement age in line with future gains in life expectancy would improve the long-term sustainability of the Nigerian pension system further.

The report stated: “Nigeria ranks on the 64th place, especially because of the insufficient adequacy of its pension system. The coverage of the pension system is still very low and limited access to financial services hampers the build-up of sufficient private old-age savings to cushion the lack of the public pension pillar. With respect to sustainability, Nigeria ranks also in the bottom third. The harmonization of the retirement ages of the various professions and adjusting the retirement age in line with future gains in life expectancy would improve the long-term sustainability of the pension system further.”

The report noted that among the analyzed countries, Nigeria has by far the most comfortable starting position especially due to the fact that it has one of the youngest populations worldwide.

“But nevertheless, the number of people aged 65 and older is set to increase from 5.6 million today to around 16 million in 2050. Thus, there is a need for the introduction of a pension system with a broad coverage and for further improvement of the access to financial services.”

Speaking on the report, Ludovic Subran, Chief Economist of Allianz said: “Demographics and pensions have been eclipsed by other policies in recent years, first and foremost climate change and today the fight against Covid-19.

“But you ignore demographics at your own peril, demographic change will soon be back with a vengeance. Defusing the looming pension crisis and preserving generational justness and equality are key for building inclusive and resilient societies.”

Michaela Grimm, author of the report said: “One of the legacies of the current crisis will certainly be that we have to double our efforts to reform our pension systems. What had remained of financial leeway has gone for good.”