Contributory pension schemes make provision for workers to access a portion of their pension savings according to established guidelines. However, withdrawal will affect the monthly pension the retiree receives. Nike Popoola report
Contributory pension schemes were established to provide regular monthly benefits to retired Nigerian workers.
Employers and workers are required to contribute 10 percent and 8 percent of a worker’s monthly compensation to a retirement savings account with a pension fund administrator.
However, special conditions may require workers to access some of their savings before retirement.
According to the Pension Reform Act of 2014, workers can tap into 25 per cent of their RSA savings if they lose their job and are unable to get another one after four months.
You can also access some of the funds in the mortgage scheme to help you become a homeowner.
Informal sector workers under micro-pension schemes can also access a portion of their savings based on regulatory guidelines.
Workers can also make withdrawals from additional voluntary contributions to their RSA.
To access pensions through either means, workers will be required to re-collect their data using PFA, the employer said. This ensures accurate records.
voluntary donation
Section 4(3) of the Pension Reform Act 2014 allows active employees under the CPS to make voluntary contributions in addition to the mandatory contributions to their respective RSAs. This is so that you can increase your pension after retirement.
However, this applies to employers with three or more employees and is required to implement CPS for their employees.
According to the National Pension Commission circular on PENCOM/INSP/CIR/SURV/17/22, the deadline for withdrawal from discretionary accounts is once every two years from the date of the last approved withdrawal.
Subsequent withdrawals will only be incremental contributions from the last withdrawal date.
Pencon states that in the case of compulsory contributors, the amount remitted as voluntary will be segregated in the following way: “50% will be treated as contingent and can be withdrawn within a stipulated period every year. is.”
“Tax will be deducted from the income earned in accordance with Section 10(4) of the PRA 2014. The remaining 50 per cent will be fixed as a pension and will be utilized to augment the contributor’s retirement benefits on the date of retirement.”
It is important to know how much money a worker has put aside, as voluntary contributions are not taxed, but the tax is deducted at the time of withdrawal and remitted to the relevant authorities.
Regarding how to access a portion of your voluntary contributions, PenCom says: “A girlfriend RSA holder who has made voluntary contributions and is entitled to access her RSA balance will notify her PFA of her intention to withdraw the voluntary contributions.
“PFA requires RSA holders to provide the required documentation as set out in the Guidelines for Voluntary Donations under the CPS.
“The PFA will forward all requests to access the voluntary contributions portion of RSA balances to the Commission without objection, in accordance with the Guidelines on Voluntary Contributions.”
micro pension
Section 2(3) of the Pension Reform Act 2014 provides that employees of organizations with fewer than three employees and self-employed persons are also entitled to participate in the CPS.
These categories of people, mainly employed in the informal sector, make up the majority of Nigeria’s working population and are not eligible for any retirement scheme.
According to the National Pension Commission, informal sector contributors under the MPP are allowed to withdraw at least 40% of their RSA contributions.
However, this is different from what you get in the formal sector. In the formal sector, a contributor can only access her 25 percent of her RSA balance four months after he leaves paid employment or upon retirement.
However, the CPS was opened to the informal sector in March 2019 as part of the federal government’s financial inclusion goals.
However, to begin withdrawing the 40 per cent contribution, the journeyman must have contributed to the RSA for at least three months.
Pencom Executive Director, Ms. Aisha Dahiru Umar, said the micro-pension scheme targets a large portion of Nigeria’s working population, who work in the informal sector.
She said: “Prospective micro-pension contributors must open a retirement savings account by filling out a physical or electronic registration form with a pension fund administrator of their choice.” Contributors report daily and weekly , you can contribute monthly or whenever it suits you. ”
She goes on to say, “All contributions are split in two, with 40 percent going toward a contingent withdrawal and 60 percent going toward retirement. Contributors can, if they choose, all accrued investment income. You can periodically withdraw all or a portion of your RSA’s contingent balance, including:
“The Contributor may also elect to convert the contingent portion of the contribution into a retirement component. The remaining balance in the RSA shall be available upon the Contributor’s retirement or upon reaching age 50.”
unemployment
According to PenCom, more than 443,720 donors have withdrawn quota 182.19 billion from CPS since the launch of the scheme until the end of December 2022.
The pension industry regulator defines temporary unemployment or redundancy as when an employee voluntarily retires, retires or is fired before reaching the age of 50 and is unable to secure another job four months after the redundancy. It is said to refer to
Pencom states that in order to receive the 25 per cent benefit for temporary unemployment, individuals will need to present some documentation in the revised regulations on the management of retirement and terminal benefits. Masu.
It is a letter of resignation or dismissal issued by the employer. If the employer fails or refuses to accept the employee’s resignation, the PFA shall write to the employer confirming the employee’s resignation and ensure that a copy of the receipt is retained as proof of receipt. will do. If the employer does not respond to her PFA survey in (b) above within her 30 days, the employer’s refusal will be deemed acceptance of the employee’s resignation for purposes of benefit payment. ”
A formal request for withdrawal of 25 percent of the RSA balance and other relevant documentation specified by PenCom will also be required.
mortgage
PenCom has approved guidelines for accessing RSA balances for the payment of mortgage equity contributions by RSA holders.
This authorization is in line with section 89(2) of the PRA 2014, which allows RSA holders to use a portion of their RSA balance to pay down equity in their mortgage.
Anyone interested can contact his PFA to explain the process. PFA prints the accounting statement and determines the 25 percent.
PenCom spokesperson Abdulkadir Dahir said they had obtained the requirements from the PFA. “Once you have that, you can go back to your mortgage lender and get an offer letter for the property and do your own due diligence to accept.” This is to enable us to provide you with the following. 75 percent will continue to be funded by someone else.
“The person has to give you a loan offer letter saying they are willing to lend to you, and this is the amount of contribution you need to submit.” If you have that equity contribution in your offer letter, you can contact the PFA at that point and request the 25 percent. ”
PenCom states that regardless of the contribution amount required by the mortgage lender, the maximum withdrawal amount is 25% of the mandatory RSA balance as of the application date.
If 25% of a contributor’s RSA balance is not sufficient to pay as an equity contribution, the RSA holder can utilize a contingency portion of the voluntary contribution (if any).
implication
Some workers who were able to qualify for part of the first 25 percent due to unemployment may still be able to qualify for a mortgage.
However, the effect of dual access means that the monthly salary such workers receive is reduced upon retirement.
The Chairman and Chief Executive Officer of Achor Actuarial Services Limited, Dr. Pius Appele, said the mortgage scheme is a welcome move in the right direction as it creates a unique selling proposition and will lead to deeper financial inclusion in the Nigerian pension industry. It is said that it is a development.
He said it would also provide RSA holders of the CPS with access to equity financing, providing a sustainable long-term source of financing for the housing and mortgage lending sector, thereby contributing significantly to Nigeria’s economic growth and GDP.
Since the system’s introduction in 2004, the biggest challenge facing retirees under CPS has been not only ensuring that they receive their benefits on time, but also ensuring that they can live a decent life in retirement. He points out that the main reason for this is the inability to obtain sufficient retirement benefits. Not explicitly defined in PRA 2014.
He said: “Section 3.6 of the PenCom Guidelines provides that “If an RSA holder had access to the 25 per cent due to an RSA balance on a home loan and unemployment, he/she shall access the lump sum upon retirement in accordance with Section 7. It is written as “Do.” (1)(a) of the PRA, 2014, must follow guidelines issued by the Commission.
“The critical analysis in this section shows that most RSA holders are likely to receive lump sum payments totaling approximately 50 percent to 75 percent of their RSA balances before or at retirement, with only a small portion of their RSA balances It has become clear that there is a high possibility that there will be leftovers for retirement savings.Pension.
“This is an indirect response to the demands of many stakeholders in the pension industry for an increase in the proportion of RSA balances paid as a lump sum to retirees (from 25 per cent to at least 50 per cent).”
