PenCom Redesigns Pension Scheme to Capture Informal Sector

PenCom has announced a renewed focus on the informal sector as it moves to expand pension coverage and boost financial inclusion through a redesigned micro pension plan. The initiative is aimed at addressing one of the most critical gaps in Nigeria’s retirement savings structure—the exclusion of millions of workers in the informal economy from any form of social security.

According to the National Pension Commission, the redesigned scheme is structured to be flexible, technology-driven, and accessible to artisans, traders, transport workers, and other self-employed Nigerians who make up the bulk of the country’s workforce but remain outside formal retirement schemes.

The informal sector accounts for more than 80 percent of Nigeria’s total labor force, making it a critical component of the economy. Yet, despite its size and contribution, participants in this sector have historically been left vulnerable due to lack of retirement savings plans. PenCom’s redesigned pension product seeks to address this by offering simple, low-cost entry into the pension system, while ensuring contributors enjoy the same protection, transparency, and accountability that the contributory pension scheme provides to formal employees. Officials say this will not only provide safety nets for individuals but also help mobilize long-term capital that could be channeled into infrastructure and development projects.

The micro pension scheme was first introduced in 2019, but uptake has been slower than anticipated, largely due to lack of awareness, trust issues, and difficulties in contribution collection. The redesigned plan, according to PenCom, now leverages digital platforms to simplify onboarding, payment, and withdrawals. Contributors can use mobile money, agent networks, and other electronic channels to make flexible contributions based on income levels, whether daily, weekly, or monthly. Withdrawals will also be easier, with provisions for both contingent needs and long-term retirement savings. This level of flexibility is seen as crucial to attracting informal sector workers, whose incomes are often irregular.

PenCom explained that one of the core changes in the redesigned framework is the integration of technology and partnerships with fintech companies to improve accessibility. With Nigeria witnessing rapid growth in mobile phone penetration and digital payment systems, the Commission believes that deploying technology is the only viable way to bring millions of informal workers into the pension net. Stakeholders say that this could significantly accelerate financial inclusion, which remains a major policy priority for the federal government and regulators across the financial system.

Beyond the technology-driven approach, the Commission is also focusing on aggressive public enlightenment campaigns. Many informal sector workers still view pensions as a product reserved for civil servants and corporate employees, a perception PenCom is seeking to change. Awareness drives are being launched nationwide, targeting markets, transport unions, trade associations, and rural communities. Officials say it is critical to build trust and demystify pension savings as a tool for security in old age, while emphasizing that participants can make small contributions without pressure. The success of the redesigned scheme will depend largely on how well these awareness efforts resonate with Nigerians who have long been excluded.

Analysts believe the expansion of pension coverage into the informal sector will not only provide security for workers but also deepen Nigeria’s financial markets. Pension funds already play a significant role in the economy, with over ₦19 trillion in assets under management as of mid-2025. Extending coverage to millions of informal workers could push this figure higher, creating more capital for investment in infrastructure, housing, and industrial projects. For a country struggling with limited fiscal space, mobilizing domestic savings through pensions is seen as an effective way to fund development without over-reliance on external borrowing.

There are, however, challenges that PenCom must address. Informal sector workers often have irregular earnings, which makes consistent contribution difficult. Many also distrust financial institutions due to past experiences with failed schemes. To address this, PenCom says the redesigned plan will incorporate features such as partial withdrawals, flexible payment windows, and strong safeguards to ensure transparency. Pension fund administrators have also been tasked with simplifying registration processes and offering customer service tailored to the unique needs of informal sector contributors.

Stakeholders, including labor unions and financial experts, have applauded PenCom’s efforts, describing the initiative as timely and necessary. They argue that building a safety net for millions of Nigerians is not only a social obligation but also an economic imperative. With Nigeria’s population projected to hit 400 million by 2050, the absence of a strong retirement savings culture could create a future crisis, with millions of elderly citizens lacking income support. The redesigned pension plan for the informal sector is, therefore, a proactive step to avert such risks.

In recent years, other African countries have also expanded pension coverage to the informal sector, often with success. Ghana, Kenya, and Rwanda have developed similar micro-pension products, combining government support, private sector participation, and digital platforms to reach large numbers of workers. Nigeria’s approach, with its redesigned framework, is expected to learn from these experiences while adapting solutions to local realities.

PenCom has reaffirmed its commitment to ensuring that the informal sector is not left behind in Nigeria’s pension revolution. By combining digital innovation, awareness campaigns, and strong regulatory oversight, the Commission is confident that more Nigerians will embrace the scheme. Officials have emphasized that while participation is voluntary, the long-term benefits far outweigh the costs, as contributors will enjoy financial security during retirement, while also playing a role in driving national development.

As Nigeria continues to push for inclusive growth, the success of this redesigned pension plan will be a litmus test for the country’s ability to extend formal financial systems to segments of the economy that have traditionally operated outside the regulatory framework. For millions of informal sector workers, this initiative could mark the beginning of a safer, more secure financial future.