By Francis Ewherido

At the recently concluded World Pensions Summit (WPS) Africa Special held in Abuja, one of the major issues discussed was bringing the informal sector into the pensions scheme.

Imo-pensioners

The pension scheme has a tremendous ability to provide the working class comfort when they retire. Over time, government has rolled out policies, the PenCom Act 2004 as amended in 2014 being one of them, to enhance workers welfare, especially when they retire, but many small businesses neglect or dodge their implementation.

In doing so, these business owners also shortchange themselves. I will mention only two. The first is the group life policy made compulsory by the PenCom Act for companies employing three or more staff. The company is the policy holder, but the actual beneficiaries are the staff, including the owner.

In the event of permanent disability (if the policy is extended to cover it) or death, the underwriters pay the victim or his family a specified sum, usually in multiple of his annual salary. If your annual salary is N6m, you are entitled to N18m, for instance. In the event of permanent disability, the policy provides a reasonable financial cushion to the beneficiary and if death occurs, it ensures the family has some money to carry on. It is an annual policy.

The second one is contributory pension scheme made compulsory by the Pensions Act. The act makes it mandatory for employees of companies to be part of the scheme. The company contributes 10 per cent of the employee’s salary while the employee contributes eight per cent monthly to the scheme.

Over time, some contributors have accumulated 10s of millions in their pension accounts. If you are 50, a business owner and you are not part of it, you should subscribe today. You can accumulate a reasonable sum over the next 10 to 15years before you retire.

The pension scheme is a very serious scheme, the occasional negative stories notwithstanding. That is why it has accumulated about N5.75 trillion within the 12 years it was introduced. It is a win/win arrangement for business owners. It enables you to save for your retirement, while complying with the law.

Compliance with Pensions Act and other government regulations also enables you to bid for government jobs. Some big companies also require would-be contractors to comply with the Pensions Act, among others, before they can be registered as contractors.

Some people also maintain a retirement bank account where they deposit money periodically. For this to become a veritable avenue to prepare for your retirement, you must be very disciplined and consistent in depositing money without withdrawing. One major advantage of retirement savings accounts in these times of scarcity of fund and difficulty in getting loans is that you can take money from there to fund a contract and return after you are paid, perhaps with some SOP (share of profit ) for the savings account.

But issues come in when your finances are lean and you take from retirement savings to pay, for example, children’s school fees. Chances are the money might not be returned to the account. While children’s education is laudable, taking from your retirement account, without putting it back later, negates the essence of the account: preparing for your retirement. This is why some people literally lock up their retirement account and throw the key into the ocean until their retirement (They make it almost impossible to withdraw from the account until the appointed time).

Retirement savings bank account is good. These days, the banks have all kinds of accounts and arrangements to accommodate your peculiar needs, but you still must do your due diligence. But I consider the Pensions account more advantageous. This is because some people cave in under intense financial pressure to withdraw from their retirement bank accounts. That is not possible with your pensions account until a specified time and compliance with specified requirements.

I have been concentrating on ages 50 to 60 since last week. Does it mean people must retire at 60? No way! Some people are blessed with good health and work into their 70s and even 80s. The founder of Kentucky Chicken, Colonel Harland David Sanders, started KFC in his 60s! But we must also face reality.

Many people get incapacitated in their 60s; some suffer debilitating ailments, others are not just strong enough to run around, while some lose appetite for work. You do not want to delay preparations for your retirement until you are in your 60s. Ideally, working after 60 year should be voluntary, not out of compulsion or fear of hunger. If you have the strength and zeal to carry on great; if not, let there be something to fall back on.

Some readers might also be wondering, does this writer read his Bible? Yes, he does. The Bible is replete with verses enjoining us to take care of our parents, especially in old age. St. Paul in 1st Timothy 5:8 described those who do not provide for relatives (including parent) as worse than unbelievers. But as I was writing, I heard the story of an old woman, a mother of 12, who begs to eat.

The children have abandoned her. I strongly feel it is an obligation for children to provide for their parents in old age; the parents are entitled to it after all the sacrifices they make for children from cradle to adulthood. But what if the children do not and you have no option B?

That is partly why I have never believed in children taking care (financially speaking) of parents in old age as a first option; it should be the last option. That period of life is too delicate and I would rather be in charge. I always admire retired people who still pick their bills.

All that we have been saying since last week—life policy, pensions account, group life policy and retirement saving account—are without prejudice to whatever arrangements you already have. These might include real estate, stocks, farms and other investments. Some investments provide monthly returns, others quarterly, while some are annual. But the bottom line is that even in retirement, you should have multiple streams of income to ensure you are not stranded.