What is Micro pension?

Micro pension is a voluntary and defined contribution scheme with individual account savings plan accumulated over a long period of time for the informal sector (or low-income earners). Informal sector workers do not formally retire as in the case of employees in the formal (or organized) organized sector, however there is still a need for them to prepare for the reduction in earnings capacity that accompanies old age.

Who is it for?

In implementing this initiative, the informal sector has been segmented into three broad categories which have all been targeted with appropriate pension products and sensitization programs.

The semi-formal sector

  • – Micro, Small and Medium Enterprises (MSME) with a steady flow of income
  • – Sole proprietors with more than 3 employees mostly family members and/or lowly paid artisans
  • – Employers with more than 15 employees are mandated to comply with PRA 2014 provisions

The organized informal sector

  • – Self-employed workers with relatively less stable flow of income
  • – Businesses with low start-up costs and sometimes short life-spans

The unorganized informal sector

  • – Workers who are employed by other informal subgroups as well as the formal sector
  • – These workers are generally uneducated
  • – Very low- and unstable-income earners

Guidelines for Micro Pension Plan 2018

Section 2(3) of the Pension Reform Act, 2014 (PRA 2014) provides that employees of organizations with less than three employees as well as the self-employed persons shall be entitled to participate in the Contributory Pension Scheme in accordance with Guidelines issued by the Commission.

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