My uncle worked for 28 years for an auditing firm in Lagos and his biggest regret is that he never invested any of his income during his working years.
Don’t get me wrong. My uncle did everything right—or so he thought. He was hardworking, earning a reasonably high salary, and consistent with saving a certain percentage of his salary every month for 25 years. Yet, what he had at the end of his nearly 3 decades of employment could not guarantee his financial stability for more than 3-4 years.
This is because the purchasing power of our naira has been plummeting over the last decade. What you needed 100k to achieve 3 years ago, you now need 300k or more to achieve the same. With the inflation rate on the rise, saving for retirement is no longer enough.
To protect the value of your money as well as secure your financial future, you have to look towards safe but high-returns investments. Such investments ensure that even as inflation is rising, the value of your money also rises as well. As a Nigerian, one costly mistake you should never make is to think you can save towards your retirement.
Limitations of Pension Schemes In Nigeria
Certainly, there’s something called a pension scheme for working-class individuals in Nigeria. This arrangement involves joint contributions from both you and your employer towards a retirement fund. While pension funds do accumulate interest over time, some limitations may leave participants in a less-than-ideal position. Here’s why:
1. Investment Restrictions:
Pension funds in Nigeria adhere to strict investment restrictions imposed by regulatory authorities. Although these rules aim to protect pension assets, they limit the potential for higher returns. Pension funds are typically invested conservatively, which may lead to missed opportunities for growth and wealth accumulation.
2. Limited Access:
Only about 15-17% of the Nigerian labour force have pension accounts which means the remaining 83-85% of working professionals are either relying on their children or ‘vibes and inshallah’ for life after retirement. In addition, those who are self-employed or run their own business don’t have access to a pension scheme either.
3. Administrative Inefficiencies:
Administrative challenges like payment delays and pension fraud are common in Nigeria’s pension schemes. These inefficiencies can frustrate pensioners and create financial hardships, especially for those who rely solely on their pension funds for life after retirement.
Why Investing Towards Your Retirement Is Key
While being on a pension scheme is commendable, it’s advisable not to rely solely on it. Financial freedom, rather than just getting by, should be the goal. Here are three compelling reasons to invest rather than just saving for retirement:
1. Beating Inflation:
Pension schemes generally offer low to average interest rates. With the high inflation rate in Nigeria, the only way to protect your money from devaluation is through safe, high-yield investments. Having a retirement plan targeted at this comes in handy.
2. Building Generational Wealth:
Nobody builds generational wealth from their pension funds. If you want to build enough wealth that can be transferred to your children and beyond, you would have to leverage investing opportunities like shares, real estate, and others.
3. Unlimited Earning Potential:
While pension schemes are capped at only a tiny percentage of your salary every month, independent retirement investing offers you unlimited potential to grow your wealth. You can decide how much you want to invest and how you want to invest it to ensure you reach your financial goals eventually.
Final Thoughts:
In 2023, saving alone for retirement in Nigeria isn’t sufficient. While pension schemes are a step in the right direction, they come with limitations and can hinder your ability to achieve true financial freedom.
Overcoming these constraints involves embracing safe, high-yield investments to grow your wealth for retirement. This approach not only protects your wealth from inflation but also builds generational wealth for the benefit of future generations. Don’t repeat the mistakes of the past—strategically plan for a financially secure future.
It’s also important to choose the right partners to grow your hard-earned money. At BRAVEWOOD, we provide safe, high-return investment options to help you grow your money. Visit www.bravewood.ng today to start enjoying up to 21% interest per annum on your money.