PenCom: Delivering Mandate On Payment Of Retirement, Terminal Benefits

The National Pension Commission (PenCom) has, in line with the provisions of the Pension Reform Act (PRA 2014), established procedures and requirements for Retirement Savings Account (RSA) holders to access their retirement benefits as and when due.

Section 7(1) of the PRA 2014 states that an RSA holder shall utilise the amount credited to his RSA upon retirement or attaining the age of 50 years, whichever is later. The RSA holder can withdraw a lump sum from the total amount credited to his RSA, provided that the amount left after the lump sum withdrawal shall be sufficient to procure a Programmed Fund Withdrawal (PW) or Retiree Life Annuity (RLA) for life.

The PW provides the RSA holder with a monthly or quarterly pension calculated based on life expectancy. At the same time, the RLA purchased from a life insurance company offers a monthly or quarterly pension for life.

In addition to the above retirement benefits, other forms of payments exist under the Contributory Pension Scheme (CPS). These payment types include Temporary Job Loss, Death, Missing Persons, En bloc, etc.

• Programmed Withdrawal:

Programmed withdrawal is a benefit payment method by which the employee collects his retirement benefits in periodic sums (monthly or quarterly) spread throughout an estimated life span. From inception to 31 December 2022, PenCom has approved 319,833 requests from retirees to draw pension through PW mode. The retirees received a total lump sum of N908.04 billion, while their monthly pensions amounted to N14.18 billion.

• Retiree Life Annuity:

RLA, on the other hand, is a contract for regular income purchased from an approved Life Insurance Company, which provides monthly or quarterly income to retirees during their lifetime. From the beginning of the CPS to 31 December 2022, 105,047 retirees chose the annuity mode of pension payment. A lump sum of N201.43 billion was approved for payment to the retirees. In contrast, N615.78 billion was approved for payment to RLA Providers as premiums in return for monthly annuities of N6.24 billion.

• Temporary Job Loss (25 Per cent Benefit):

The PRA 2014 permits an employee who loses his job to withdraw an amount not exceeding 25 per cent of the total amount credited to his RSA. However, such withdrawals can only be made after four months of cessation of employment, and the employee does not secure another job. From inception to 2022, PenCom approved N188.51 billion (25% of RSA balances) to 453,686 RSA holders under 50 years who were disengaged from employment and could not secure another job within the stipulated time of four months.

• En-bloc Payment:

PenCom allows en-bloc payment to retirees whose RSA balances cannot procure Programmed Withdrawal or RLA that is equivalent to one-third of the prevailing minimum wage (N30,000). From the start of the CPS to the end of 2022, PenCom approved the en-bloc payment of retirement benefits to 145,313 retirees, totalling N38.71 billion.

• Death Benefits:

Death Benefits are paid to a beneficiary under a will or the spouse and children of an RSA holder who dies in service. In the absence of a wife and child, the benefits are paid to the recorded next-of-kin or any person designated by the deceased.

From inception to the end of 2022, PenCom granted approvals for payment of death benefits amounting to N328.05 billion to the legal beneficiaries/administrator of 86,610 deceased employees and retirees.

• Voluntary Contributions

Section 4(3) of the PRA, 2014 allows RSA holders to make Voluntary Contributions (VC) in addition to the mandatory contributions to augment their pension at retirement. From inception to 2022, PenCom approved withdrawals from voluntary contributions amounting to N33.82 billion by 46,957 contributors.

In conclusion, accessing retirement benefits under the CPS is seamless. Pension Fund Administrators (PFAs) must guide RSA holders who want to access their retirement benefits on the documentation requirements for each benefit payment type.