One of the major objectives of the contributory pension scheme (CPS) is to assist improvident individuals by ensuring that they save in order to cater for their livelihood during old age. At the inception of the CPS, only the formal sector employees were covered whilst persons involved in the informal sector did not have access to any formal pension protection or coverage for old age.
To address the situation the National Pension Commission conceptualised the micro pension plan with the objective of expanding pension coverage to the informal sector pursuant to the provisions of the Pension Reform Act, 2014 . The provision enables workers in private sector organisations with less than three employees as well as self-employed persons and people working in the informal sector to participate in the CPS under the MPP in accordance with the guidelines issued by PenCom.
It is important to note that upon securing employment in the formal sector with any organisation that has three or more employees, the MPC will be eligible to participate under the mandatory CPS. However, once the MPC joins the mandatory CPS, they cannot convert back to the MPP.The non-homogenous nature of the informal sector participants with respect to regularity of income was considered in the design of the MPP.
The MPC can choose to convert the contingent portion of the RSA to the retirement benefits portion at the end of every year, and may also transfer their RSA from one PFA to another in line with the RSA transfer regulations. Also, upon retirement, the MPC has the option of transferring part or all of his/her outstanding balance in the contingent portion to their retirement benefits portion.
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