Study recommends reforms to improve voluntary micro-pension
Study recommends reforms to improve voluntary micro-pension coverage
Port Moresby, PNG – With less than 15 percent of the nation saving for old age, the majority of Papua New Guineans face a grim prospect of living in poverty when they are too old to work.
A recent study examining the feasibility of expanding voluntary pension in PNG revealed that without an urgent and effective response to pension exclusion, lack of regular income & social protection among PNG’s future elderly could emerge as the dominant cause of increased poverty rate in the country.
Through a partnership with the National Superannuation Fund Ltd or NASFUND, the United Nation’s Pacific Financial Inclusion Programme (PFIP) commissioned as part of the study, an evaluation of Eda Supa (NASFUND’s voluntary superannuation product for non-salaried workers).
The study also evaluated existing and emerging digital financial services infrastructure and outreach in PNG through intensive consultations with the Bank of Papua New Guinea, Centre for Excellence in Financial Inclusion, donors, banks, mobile network operators, credit and saving societies, farm cooperatives, worker associations and exporters. A series of focus groups in Port Moresby, Kimbe in West New Britain, Goroka in Eastern Highlands, Wewak in East Sepik and Ponpondetta in Northern Oro province were also conducted to gain insights from both members and non-members of Eda Supa
Many challenges and risks were identified during consultations. Of Eda SUPA’s 30,000 registered account holders, only around 2,000 were making regular contributions into their accounts, others were not active because of complicated and inconvenient processes. They said apart from being cumbersome, the manual process involving paper-based registrations was also very expensive. With only 15 NASFUND branches throughout the country, access, information and retirement awareness were also highlighted as limitations. The lack of automated reminders for members has also meant that members are not vested in their contributions and can lead to them losing their interest in long term saving.
The study found positive conditions that are conducive to the introduction of an inclusive digital micro-pension programme in PNG. It identified a huge potential to expand the reach and uptake of pension through partnerships with interested financial service providers which had a combined presence of 12,600 physical outreach locations including bank branches, agents and mobile network operators. Leveraging existing financial infrastructures and client data, could mean that individuals could instantly open micro-pension accounts.
Going forward, the report has recommended phased changes that will help improve micropension coverage in PNG. It calls for product improvements, nationwide financial literacy especially on insurance and retirement, limiting withdrawals and discouraging lump sum payments, establishing dedicated helplines for members to access information and fiscal incentives by government to encourage more savings by non-salaried workers.
PFIP in partnership with NASFUND will scope the next phase of the project which will aim at putting to test improvements in the product and the way people can access it on pilot communities, which if found successful could be rolled out nationwide.
PFIP is a Pacific-wide programme that has helped 1.9 million low-income Pacific islanders gain access to financial services and financial education. It achieves these results by funding innovation with financial services and delivery channels, supporting policy and regulatory initiatives, and empowering consumers.
PFIP operates from the UNDP Pacific Office in Suva, Fiji and has offices in Papua New Guinea, Samoa and Solomon Islands. It is jointly administered by the UN Capital Development Fund (UNCDF) and the United Nations Development Programme (UNDP) and receives funding from the Australian Government, the European Union and the New Zealand Government.
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