PenCom targets Nigeria’s 84.9m informal workers to bridge pension coverage gap

By Mariam Abeeb

Nigeria’s quest to expand retirement security to millions of workers outside the formal employment system is gaining renewed attention as the National Pension Commission (PenCom) intensifies efforts to deepen participation in the Personal Pension Plan (PPP), a voluntary retirement savings scheme designed to bring self-employed and informal sector workers into the pension system.

With an estimated 93 per cent of Nigeria’s workforce operating in the informal sector, the challenge of extending pension coverage to traders, artisans, farmers, professionals and gig workers remains significant. PenCom’s latest figures show that although the sector accounts for approximately 84.9 million workers, only 245,315 had enrolled in the Personal Pension Plan as of August 2026.

The figures, presented at the 2026 Annual PenCom Media Conference, highlight the enormous gap between the number of Nigerians who need retirement protection and those currently covered. At just 0.30 per cent coverage, millions of workers remain outside a structured pension arrangement, raising concerns about their financial security in old age.

The Personal Pension Plan was introduced under Section 2(3) of the Pension Reform Act 2014 to provide a pathway for self-employed people and informal sector workers to save towards retirement. Unlike conventional employment-based pension arrangements, the scheme recognises the realities of workers whose earnings may fluctuate daily, weekly, seasonally or monthly.

For many Nigerians, particularly those who depend on small businesses and personal enterprises, retirement planning often takes a back seat to immediate household expenses, business needs, school fees and other financial obligations. The PPP seeks to address this challenge by offering a flexible savings structure that allows contributors to determine when and how much they can contribute, subject to the scheme’s rules.

Under the arrangement, eligible Nigerians aged 18 and above can register with a Pension Fund Administrator (PFA), either directly or through an Accredited Pension Agent. Registration requires a National Identification Number and a phone number, making the onboarding process relatively straightforward.

Contributions can be made daily, weekly, monthly or whenever the contributor has funds available. Payment channels include mobile money, Unstructured Supplementary Service Data (USSD) codes and direct fund transfers, providing different options for workers with varying levels of access to formal financial services.

The flexibility is particularly important in Nigeria’s informal economy, where earnings are often irregular and depend on market conditions, customer demand, agricultural seasons and other factors. A trader may record strong sales on some days and little income on others, while an artisan’s earnings may depend on the availability of jobs. A rigid contribution schedule could therefore discourage participation among those the scheme is intended to serve.

However, the low enrolment figures suggest that flexibility and simplified registration alone may not be enough to persuade millions of informal workers to begin saving for retirement. PenCom’s presentation identifies affordability, limited awareness, trust, preference for readily accessible savings, distance from pension institutions and digital-literacy barriers as some of the challenges affecting participation.

For workers struggling to meet daily needs, committing even a small amount to a retirement account can appear less urgent than paying for food, transport, rent or business supplies. The long period before retirement benefits become accessible may also discourage people who need their savings to remain available for emergencies.

These realities make public education and trust-building essential to the success of the Personal Pension Plan. Workers need to understand not only how to open an account but also how regular contributions, however modest, can help them prepare for life after active employment.

The structure of the PPP provides for a division of contributions into two portions: a contingent portion and a retirement benefits portion. Under the arrangement outlined by PenCom, 50 per cent is allocated to the contingent portion, while the other 50 per cent is designated for retirement benefits.

The contingent portion may be withdrawn three months after the initial contribution and subsequently once every two months, in accordance with the scheme’s rules. The retirement benefits portion is accessible from age 50 or earlier in cases of medical incapacitation. Retirement benefits may be received through programmed withdrawal or a one-off withdrawal of the Retirement Savings Account balance, subject to applicable provisions.

The arrangement seeks to balance the need for long-term retirement savings with the financial realities of informal workers who may require access to part of their funds before retirement. It also provides for the transfer of benefits to a named legal beneficiary in the event of the contributor’s death or where the person is declared missing, in line with applicable procedures.

Beyond providing financial support in old age, the plan is intended to encourage a culture of savings among workers who may not have access to employer-sponsored retirement arrangements. It can help contributors build financial independence and reduce their vulnerability when they are no longer able to work or generate regular income.

The importance of extending pension coverage is further underscored by the informal sector’s contribution to the Nigerian economy. According to figures presented at the conference, the sector accounts for an estimated 58 to 65 per cent of gross domestic product, despite having limited pension coverage.

This creates a significant policy challenge: a large section of the workforce contributes substantially to economic activity but remains inadequately protected against the financial risks associated with ageing and retirement.

Women face a particularly difficult situation. PenCom’s presentation indicates that 96 per cent of employed women work in the informal sector, making them disproportionately affected by the pension coverage gap. Many women operate small businesses, engage in trading or provide services without the benefit of employer-backed retirement savings.

Expanding access to the PPP could therefore provide an important avenue for strengthening women’s long-term financial independence. However, effective inclusion would require targeted awareness campaigns and contribution arrangements that recognise the different income patterns and financial responsibilities of women in the informal economy.

To strengthen access, PenCom has also introduced the Accredited Pension Agent framework, which is designed to connect pension administrators with potential contributors, particularly in underserved and rural communities.

The agents are expected to serve as intermediaries between Pension Fund Administrators and contributors, support onboarding, facilitate transactions through Commission-approved channels and provide financial education. They are also required to maintain records necessary to confirm transactions carried out through them.

Six pension agents had been accredited across three licensing dates in 2026, according to the presentation. They are Awabah Remit Services Limited, e-Tranzact International Limited, NextAutomate APA Limited, SunTrust Bank Nigeria Limited, PrimeTrust APA Limited and Majestic APA Limited.

Their role could prove important in reaching workers who may be unfamiliar with pension institutions or unable to access their services conveniently. By taking information and registration support closer to markets, workshops, farms and local communities, accredited agents can help reduce the distance between pension services and the people who need them.

Nevertheles, expanding the network of agents must go hand in hand with public confidence, effective oversight and clear information about approved payment channels. Informal workers need assurance that their contributions are properly recorded and managed and that they understand the conditions governing withdrawals and retirement benefits.

PenCom’s proposed inclusion strategies also emphasise financial literacy, simplified enrolment, digital onboarding and partnerships with government agencies, non-governmental organisations and development partners. The use of local languages and engagement with community, market and faith leaders could help communicate the benefits of retirement savings to different groups.

Radio, television and social media are also identified as channels for reaching a wider audience. Such campaigns would need to go beyond general publicity by explaining how the scheme works, where workers can register, how contributions can be made and what rules apply to accessing their money.

The Commission has also highlighted seasonal contribution options and the need to improve awareness of Sharia-compliant pension plans. These approaches could help make the scheme more responsive to the circumstances and preferences of different contributors.

However, the ultimate measure of success should extend beyond the number of accounts opened. PenCom’s presentation stresses the importance of tracking the progression from access and enrolment to actual contributions, continued participation and adequate retirement savings.

A worker who registers but never contributes again may remain without meaningful retirement protection. Consequently, monitoring active contributors, frequency of payments, persistence over time, average account balances and retirement adequacy would provide a clearer picture of the scheme’s impact.

This distinction is critical because pension coverage is not simply about bringing people into a system; it is about helping them accumulate enough resources to support themselves when they can no longer depend on active earnings.

For the Personal Pension Plan to achieve its objectives, the challenge will be to turn awareness into enrolment, enrolment into consistent contributions and consistent contributions into meaningful retirement benefits.

That requires a combination of accessible services, public education, trusted intermediaries and policies that accommodate the financial realities of informal workers.

Nigeria’s informal sector remains too large and economically important to be left out of the country’s long-term retirement security framework.