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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 (Defined Benefit Plan)
  • 401(k) Plans
  • Roth IRAs

You can take sometime and read up all about these different pension plans on Bankrate website. But let me just talk about one only. The PSP (Profit Sharing Plans). You will love this one, as much as I do.

Profit Sharing Plans (PSP)

Imagine if your current employer is sharing profit with you. How much do you think you would be getting monthly? Just imagine. I don’t expect you to know exactly how much. But its surely way big, right? That’s the point. But they won’t like to share, rather they want to suffer you by deducting from your present salary in the guise of planning a future for you. Bullshit!

But think about it. A profit sharing plan will make you more money and you won’t have to be planning for retirement. In fact, you shouldn’t be planning for retirement. You should be planning on sharing profits with big and existing multinational companies.

I know you want to ask me, how?

What Is Your Retirement Plan?

Let me even ask you what you have been planning for your retirement. If you don’t have a better retirement plan, now is the time to make a quick adjustment. You cant just leave everything to chance. I might even shock you with some of the ways people are knowingly or unknowingly planning for their retirement.

  • Some invest in stocks
  • Some buy or build properties
  • Some invest it in different businesses
  • Some even invest it in their children
  • While some ignorantly put it in the banks or pension funds

You see all these retirement plans, they may not protect you when you are tired. Even the children you gave birth to may not care for you. The stockmarket can crash, like it did in 2017 and many pensioners lost heavily. All their life savings gone in one stock market crash.

You might think building properties are better, but the question is, how do you earn from your properties? Mostly through rentals. But how much is rentage fee in Nigeria? Even if you get N600,000 per annum for 3 bedroom flat, which is better than your pension fund, how many flats would you build from your salary?

You can’t plan with that, unless you just want a hand-to-mouth kind of life when you should be enjoying life in your retirement.

This Should Be Your Retirement Plan

If you understood the Profit Sharing Plan (PSP), that’s what I want your retirement plan to follow. Think of how you can share profit with a multinational company.

Let me give you a blueprint on how to plan your retirement with a PSP. If you are currently working, you stand a better chance to use this blueprint better. Even if you are not presently employed, or you are self employed, you too can use this blueprint.

The first point to note is that it’s cheaper to start. And that you can start with as low as $100. That amount would guarantee you 10% returns on a monthly basis. If you work it around your monthly pension deduction, some of you pay more than $100 monthly.

That means if you plan to retire in 2 years, you would have saved $2,400 with a compounding interest of 0.45% daily or 10% monthly. In 16 months lifespan for each of the $100, you would have a return of About 300%.

Let me even say that you can only invest $100, because you have so much bills to pay monthly and can’t afford to be deducting $100 monthly. In 6 years on a compounding interest of 0.45% daily, see what I calculated for you using TheCalculatSite: $80,252.67 total interest will be earned in the period.

You are rich on retirement if you do this now. Think about how many more years you still have in active service before your retirement. Think about how much a $100 can become for you in the next 5 years and 7 months to be precise. $80,252.67 is equivalent of N40,126,335. And you can still invest even after you have retired rich.

Compare that with your pension fund of N6,000,000 in 10 years from a contribution of over N2.4 million of your salary in 2 years deduction. If you can invest $500 or even $5,000, think of what the returns would be in the same period. Some of you can afford to do up to $25,000. And that’s a return of $75,000 in just 16 months. While $50,000 would give you $150,000 in 16 months.

How This Retirement Plan Works

I have already told you. It’s a profit sharing plan. I have found this comoany for you in the U.K. (United Kingdom), with global presence in over 100 countries including Nigeria. This company is willing to share their profit with you.

Here’s how it works. They have several investment packages, from $100 to $50,000. And they pay returns from the profit they generate. You get 0.45% daily or 10% monthly on a compounding interest.

You role here is just to invest the amount you wish. The company will give you an online portal where you can monitor your investment, make withdrawals when you want or upgrade your investment package at any time.

What You Should Do Now

Get more information on this. You shouldn’t just take my world for it. Even though I have painted this as the best retirement plan for you, find out more for yourself. Moreover, somebody has to introduce as your referral or sponsor to the company. That’s how it works.

So, you will need a referral or sponsor. The sponsor will also help educate you more, and guide you throughout your investment period.

For example, if I’m your sponsor, my responsibility includes helping you to get more information, ensure you get adequate training on how to invest wisely and better usage of the portal. I should also be standby for you whenever you need guidance pr have questions on anything regarding the investment. You sponsor can also guide you on how much you should start with.

After you have invested for your own retirement plan, and started earning returns, then you can help sponsor others,like your colleagues in the office.

What To Do About Your Colleagues

Don’t plan for yourself alone. Help others to also discover this retirement plan. Your colleagues should be the first to know after you starts seeing returns from your own investment.

However, don’t rush immediately to tell them. Wait till after few weeks, like 2 or 3 weeks. It’s enough time to start seeing some revenue trickling into your account. You need some proof to show them. And because it’s in dollars it will be more convincing.

Remember, you will also earn up to 10% for sponsoring your colleagues. Yes the company pays for referrals, it’s one time, and it’s based on the initial amount the person invested.

Not just your colleague, including your friends. Target when salary is usually paid so they won’t say there’s no money. Remember, you are helping them make a better decision about their own retirement.

Conclusion

There’s no better retirement plan than a proper investment. But as a civil servant or private sector worker, you are limited to mostly pension fund, which is deducted from your salary.

There’s no guarantee on that, as long as Nigerian government are the ones controlling it. Even the private sector led pension managers, the kind of pension you get are not inspiring.

That’s why you need to plan something else for yourself. If you in an organization where pension deduction is actually done from source, you may not be able to shop it. But that shouldn’t stop you from planning your retirement better. I have shown you that with just $100 you can generate a better investment plan in less than 6 years, of over $80,000 in returns.

Chinedu David
Chinedu David is a business consultant with experience in oil & gas, hospitality, IT & telecom, consumer products, business strategy, marketing and distribution. He was the telecom editor for SuccessDigest for over a decade. And founded Mystore, one of the indigenous online marketplace in 2013. Drop a comment below and he will respond to your query. He can also be reached via email: nedu@myblog.com.ng or Call/Text/WhatsApp: 07087770518
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