Accessing Retirement Benefits Under Contributory Pension Scheme
In line with the provisions of the Pension Reform Act, 2014 (PRA, 2014), the National Pension Commission (PenCom) has established procedures and requirements for Retirement Savings Account (RSA) holders to access their retirement benefits as and when due.
PenCom also has guidelines and regulations explaining the procedures for administering and accessing retirement benefits under the Contributory Pension Scheme (CPS).
Section 7(1) of the PRA 2014 states that an RSA holder shall, upon retirement or attaining the age of 50 years, whichever is later, utilise the amount credited to his RSA upon retirement.
The two modes of accessing retirement benefits under the CPS are Programmed Withdrawal (PW) and Life Annuity. Programmed Withdrawal is a method by which the employee collects his retirement benefits in periodic monthly or quarterly sums spread throughout an estimated life span. The benefits paid under PW can be accessed monthly, quarterly or as a one-off lump-sum payment, depending RSA balance. PenCom approved 8,528 retirees’ requests to draw pension through the PW mode during the first quarter of 2022. These retirees received a lump sum of N36.25 billion while their aggregate monthly pensions amounted to N470.13 million.
On the other hand, a Retiree Life Annuity is an income purchased from an approved life insurance company licensed by the National Insurance Commission (NAICOM), which provides monthly or quarterly payments to the retiree during his/her lifetime. During the first quarter of 2022, PenCom granted approval to 3,264 retirees under the Retiree Life Annuity. The sum of N22.69 billion was paid to 14 Retiree Life Annuity Providers as premiums for total monthly/quarterly annuities of N231.93 million.
Death benefits are paid to the legal beneficiaries of an employee who dies before his/her retirement. The employer is also obligated to pay Group Life insurance of the deceased employee, which is not less than three times the Annual Total Emolument of the dead employee, which is also paid to the legal beneficiary.
In the first quarter of 2022, the Commission approved the payment of death benefits amounting to N13.39 billion to the legal beneficiaries/administrator of 2,574 deceased employees and retirees. The amount comprised 1,923 public sector and 651 private sector employees/retirees.
PenCom allows the retiree an en-bloc payment of all the contributions and returns in the RSA. During the first quarter, PenCom approved the en-bloc payment of retirement benefits of 2,084 retirees whose RSA balances were N550,000 or below and considered insufficient to procure Programmed Withdrawal or Retiree Life Annuity of a reasonable amount for an expected life span. In this regard, N519.51 million was paid to retirees from the public and private sectors.
Significantly, the CPS allows RSA holders under 50 years who lose their jobs but are not yet entitled to a monthly pension to withdraw 25 percent of their RSA balance if they cannot secure another job after four months of such cessation of employment. In the first quarter of 2022, the Commission approved the payment of N5.66 billion to 9,517 RSA holders under 50 years who were disengaged from work and unable to secure jobs within four months.
To augment their pension at retirement, Section 4(3) of the PRA, 2014 allows contributors desirous of increasing their contributions through Voluntary Contributions (VC). In such cases, the Withdrawal of VC shall be once every two years from the last approved withdrawal date. Subsequent withdrawals shall only be on the incremental contributions from the previous withdrawal date. During the first quarter of 2022, PenCom approved the Withdrawal of voluntary contributions amounting to N1.415 billion in respect of 787 contributors.
When an employee goes missing, the employer or the missing person’s Next of Kin or Legal Beneficiary must inform the PFA. An employee is considered missing if they are not located within a year of the reported missing date, and a board of inquiry appointed by PenCom concludes that they are assumed dead based on the facts and information at hand. PenCom communicates to the PFA or MDA as the case may be. The legal beneficiary can access the benefits of the missing employee under the guidelines for death benefits.
In conclusion, accessing retirement benefits under the CPS is seamless. There are clear guidelines and regulations for the process. Pension Fund Administrators (PFAs) are also required to guide RSA holders who want to access their retirement benefits.
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