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How To Start A Solid Retirement Plan In Nigeria

What if there’s a better retirement plan than your pension fund? How do you see a retirement plan that can guarantee 300% returns for you in every 16 months? Imagine how much your current monthly salary deduction paid into your pension fund can return to you in every 16 months.

Let’s even do the maths. If your monthly pension deduction from your salary is N100,000. That’s about $200 in today’s exchange rate. How Much returns do you get from your current pension fund?

I did a pension calculation on Leadway Pensure, and here’s what I got. It asked me how much I want as my monthly pension when I retire, and for how many years I want it paid? Plus how many years I still have left to retire, and how much interest rate I want on my pension fund?

I picked the following: N50,000 as my monthly pension salary after retirement. I said, I have only 2 years left to work. That I want 15% interest rate, and I want to collect the pension for 10 years. Here’s what the result gave me. That I would need to have a retirement saving account (RSA) balance of N2,780,225.16 from a monthly contribution of N100,050.98 for the next 2 years before my retirement.

Just do the calculation. I would have paid N2,401,223.52 in 2 years to my pension fund managers. It’s from this money they will now pay me N50,000 monthly, after they have invested it, for the next 10 years. I’m only reaping from the profit they earned from investing my money. And I will only get N600,000 in one year and total of N6,000,000 from them in 10 years after my retirement.

What happens after that 10 years? That’s for me to figure out, right? That is what many pensioners are going through already. And some are still planning to go through it also. Please, I beg of you, don’t go through it too.

Collapse Of Pension Funds In Nigeria

No matter how juicy your pension fund managers talk about their retirement plan for you, it can never be the best deal for you. What they are actually doing is a retirement plan for their owners. The best retirement plan is the one you can control and plan for yourself.

Don’t forget that in a system like Nigeria, the pension fund has always been a major source of corruption. It has never worked, because the pension fund in Nigeria has collapsed long ago. Those currently managing it knows that, and has since been stealing from it. Even the government steals from it from time to time, and calls it loan.

When you will realize what has happened will be when it’s time to pay up. That’s for civil servants. However, for the private sector workers, it’s even not the best deal they are getting. You can see the calculation Leadway Pensure gave me. With that you can’t get anything better to live on when you retire.

Nigerian Total Working Population

One of the problems with retirement plan is the number of people who maybe retiring, the current number of retirees and the available resources to cater for them. Nigeria has a large workforce with no adequate plan for their retirement.

According to Proshare Nigeria, the site lamented that out of the total workforce of 69,470,091 in Nigeria, only 7,348,028 workers has a retirement savings account (RSA) with any pension fund manager. It’s even an old report of quarter 4 of 2016. That’s just 10.8% of the total workforce. At the current date, the figures might even be worse.

If you think it’s because Nigerian workers don’t like to plan for their future, then you lied. Nigerians like to plan even for the dead. That’s why government officials are stealing state funds. They are planning for their future and their children with stolen funds.

But legitimately, Nigerians would use pension funds if actually it guarantees a good deal for them. Hence the reason for the boycott, because it doesn’t offer any retirement plan when you are tired. But I have something that will surprise you. It’s better, it’s cheaper to start, and it’s in dollars, so you won’t have to worry about naira devaluation and inflation. I will soon come to that.

Different Types Of Retirement Plan

The best way to understand retirement plan is to see it as a savings account where you put aside some monies you earn monthly for use when you retirement from employment. So, I decided to take a look at some of the retirement accounts available. Some of them are not applicable in Nigeria, but it’s good you know what’s out there too.

  • IRA (Individual Retirement Arrangement)
  • SEP (Simplified Employee Pension)
  • PSP (Profit Sharing Plans)
  • DBP (D