This is one of the findings of a feasibility study undertaken by the UN’s Pacific Financial Inclusion Programme (PFIP) to determine whether it was possible to develop a micro-pension product that allows self-employed or informal sector individuals to accumulate savings for their old age in a secure, affordable and well-regulated environment. The study was carried out by Consultancy firm pinBox solutions in partnership with NASFUND, using their ecosystem of customers and stakeholders.
The findings were presented to government ministries and departments, commercial banks, microbanks, insurance providers, telecommunication companies, mobile network operators and exporter organizations on Monday in Port Moresby to seek their inputs on ways to improve coverage of micro-pension in Papua New Guinea (PNG).
The study revealed that formal pension coverage in PNG is limited to less than 15 percent of the PNG workforce. Like in most of the Pacific Island countries, non-salaried workers are left out of the mandatory (employer-led) superannuation in PNG. The study also found that those that did have a voluntarily pension account were only saving for short-term goals and not for old age.
With increasing life expectancy up from 49 years in 1975 to 60 years currently, weakening support from extended family and the community, most Papua New Guineans will need to accumulate enough lifetime savings to last for at least 20 years to sustain them in old age.
The low level of awareness of concepts such as retirement and old age poverty combined with the lack of knowledge on product features of the NASFUND’s Eda Supa - voluntary pension account, has led to low uptake and usage of pension by Papua New Guineans working in the informal sector.
Uptake of micro-pension by women was also found to be lower than men, making them more susceptible to old age poverty. While women were found to live longer than men, they received lower incomes in comparable occupations, had a shorter working age, experienced frequent employment interruptions and lower access to banking, payments and insurance.
NASFUND General Manager Ian Tarutia said the fund with the support of PFIP is exploring innovative digital finance tools that could help convert even modest contributions into a meaningful retirement saving over a long period of time.
“The majority of our citizens have little experience with long-term savings or formal finance. We are trying to get individuals who are currently outside of the superannuation net to join Eda Supa. These are the self-employed, those operating a small business, working in a small establishment with less than 10 employees, farming in cash crops or recipients of landowner royalties, to start thinking about their income when they can no longer work,” he said.
He added that by using intermediaries, NASFUND hopes to use existing digital channels and leverage on partnerships with commercial and micro-banks, insurance companies, telecom operators and export houses to improve convenience and lower the cost of making contributions.
PFIP’s Programme Manager Bram Peters said PNG has reasonable banking coverage, but the structure and cost of banking remains relatively high. This is prohibitive for long-term old age savings, especially for lower income individuals with small value transactions.
“During the next couple of months, we hope to launch an appropriate, affordable and flexible micropension product, which really meets the needs Papua New Guineans working in the informal economy to enable them to support themselves and their families later in life.”
He added that the programme intends to trial a model in PNG that could be replicable in other Pacific island countries.
He added that the workshop was very well received with support promised by the Bank of PNG and other stakeholders following which the programme intends to trial a model in PNG that could be replicable in other Pacific Island countries
PFIP is a Pacific-wide programme that has helped 1.8 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.
The National Superannuation Fund (NASFUND) is a registered trust in accordance with the Superannuation (General Provisions) Act 2000 and incorporated and domiciled in Papua New Guinea. It took over the role of National Provident Fund which operated from 1980 to 2000.
It is the only superannuation fund that is mandated by law to collect compulsory contributions from employees and employers, towards the retirement savings of all private sector workers in Papua New Guinea. NASFUND contribution is compulsory for every employer employing 15 or more people for every employee thereof. NASFUND has its headquarters in Port Moresby and currently operates through 22 branches across the country.