Low income earners and those employed in the informal sector can now make voluntary pension contributions through a new mobile phone based digital payments platform.
Fiji’s National Provident Fund (FNPF) is piloting the Vodafone M-PAiSA platform to allow members of the voluntary savings account to make contributions to their retirement savings through digital channels.
FNPF through the assistance of the United Nations – Pacific Financial Inclusion Programme (PFIP) is testing this new innovative mobile payment solution which allows low-income earners to make small contributions conveniently anytime, anywhere using their Vodafone M-PAiSA account. The digital model is designed to encourage more Fijians to actively save for retirement and to remove the hassle of lining up at a FNPF branch and to provide a means for rural Fijians to make contributions and secure their future.
“This product makes it possible for people in the informal economy to save money towards their retirement. The amount saved becomes their income once they are too old to work or if they become unfit due to old age, illness or injury, or can be used to support their families after the death of the member”
“Often people in the informal sector are financially excluded and therefore vulnerable and subject to neglect if family members are unable to care for them,” said Krishnan Narasimhan, PFIP Deputy Programme Manager.
FNPF’s Chief Operations Manager Jioji Koroi said “We are excited to embark on this project with PFIP and Vodafone, aimed at helping the most vulnerable Fijians to live out their twilight years with dignity, security and independence.”
“The project team will be learning from registrants to make sure that the scheme is tailored to the needs of the informal sector with regards to payments flexibility and are also exploring other possible partners (distribution/collection agents) to make it simple to regularly contribute to retirement savings,” he added.
Vodafone Fiji Head of E-Commerce and Corporate Affairs Shailendra Prasad said, “We are delighted to offer a highly accessible and convenient mobile payment channel to make voluntary FNPF contributions a reality.
Mobile phone based payment systems are helping achieve greater financial inclusion around the world particularly for the vulnerable and women in unprecedented ways. We are therefore excited to be the first to offer this facility to our customers to make voluntary contributions to their FNPF superannuation account. This will help them secure their future to still be able to live a decent and respectable life after retirement through a secure pension fund.
The service offers a convenient payment option for labourers, market vendors and those who may be self-employed such as those in the agriculture sector to register and start saving for their old age through an FNPF account. Registered M-PAISA users can dial *567# to access the service on their Vodafone and Inkk mobile.
Over the next six – nine months, FNPF will be testing the product with at least 500 new registrants from the informal sector. During this period, they will be monitoring whether the registrants will continue to save at regular intervals and will study and analyze their behaviours, attitudes and motivation to do so.
Last year, PFIP funded a feasibility study which was undertaken by a Netherlands-based micro pensions consultant specialised in pension research on the viability of a voluntary scheme in the Solomon Islands and Fiji.
In Fiji, the research found that demand for a product was strong, with more than 72% of the target group respondents planning to rely on their own savings to provide for old age income, and more than three-quarters of the respondents interested in a pension product that enabled them to save for retirement but also allowed withdrawals during times of emergency.
While the FNPF voluntary product has been available since 1985, only six percent of Fijians in the informal sector (7,000 people) save recurrently with the scheme. It is hoped that the new digital channel will increase the percentage of those saving regular.
PFIP is also assisting the Solomon Islands National Provident Fund with new digital channels for pension contributions.
How does voluntary product work?
The product consists of two separate savings accounts. Every time a client saves money, these savings are split between the two accounts: General Account (30%) and Pension account (70%).
Under the general account, the client can withdraw money for emergencies as listed under FNPF rules while the pension account only becomes available at age of retirement (55) or in the case of disability. In case of early death, the funds in both accounts are transferred to the beneficiaries of the account holder.
The account does not charge any account fees and earns an attractive interest rate, with rates in recent years of approximately 6%, meaning that the account holder accumulates more savings over the long haul.
Unlike a traditional account (requiring mandatory periodic payments), the voluntary account is flexible and allows account holders to save into the account whenever they can.
At age of retirement, account holders can receive a lump sum payment or opt for monthly payments till their savings are used up.
PFIP is a Pacific-wide programme that has helped over 16 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 Fiji National Provident Fund (FNPF) is Fiji’s largest financial institution established in 1966 under the FNPF Act.
It is the only superannuation fund in Fiji mandated to collect compulsory contributions from employees and their employers to save for workers’ retirement. A key pillar of the Fiji National Provident Fund Strategic Plan is to add value to members through enhancing quality of life apart from building savings for retirement.
Apart from retirement savings, the FNPF also provides its members other financial services such as housing, medical and education assistance.