By Patience Saghana
National Insurance Commission (NAICOM) has counselled retiring workers in the country to choose life annuity products from registered life insurance companies.
Mr. Fola Daniel, Commissioner for Insurance while addressing Permanent Secretaries in Federal Civil Service in Abuja advice retiring workers to opt for life annuity
With reference to Section 4 of Pension Reform Act, 2004 which provides that an employee can on retirement make withdrawals from his Retirement Savings Account (RSA) in the form of a programmed monthly or quarterly withdrawal based on his life expectancy or life annuity bought from a life insurance company, the Insurance commissioner said life annuity is their best bet.
The retiring worker can as well withdraw a lump sum from the balance in his RSA provided that the amount left in the account after the withdrawal is enough to fund a life annuity or programmed withdrawal of not less than 50 per cent of his annual remuneration at the date of retirement.
Fola Daniel enlightened retiring workers on the need to embrace the life annuity that guarantees them pension for at least 10 years or for as long as the retiree lives.
According to him, â€œNAICOM takes the issue of annuity very seriously and will do everything within its powers to protect the interest of the retirees. From now on, there is no reason for any retiree to be dissatisfied, and there is no longer any cause for anyone to queue up for pension benefitsâ€.
He reiterated, â€œWith the risk of appearing to be a little partial, I will like to recommend the annuity option to any retiring employee. Not only does this option guarantee a regular payment for life, it is also guaranteed for a minimum period of 10 yearsâ€ Daniel said.
He also upheld that retirees who bought life annuity products with proceeds of their pension contribution are likely to draw more than they invested even as he reassured that the insurance industry is equal to the challenge in this regard.
He said, â€œA number of retirees will end up enjoying much more than what they have in their RSA if nature is kind enough to give them long life, as the annuity option will be their prosperity. I also want to give you every assurance that the insurance industry is up to the task and NAICOM has the capacity to provide effective supervision and regulation on annuitiesâ€
NAICOM boss who also explained that the Pension Reform Act gave retiring workers the freedom to choose from any of the six types of life annuity products sold by life insurance companies, added that they can select two or more variants in a particular annuity product.
â€œA retiree may opt for a combination of single premium and immediate annuity, while another retiree may prefer a single life variable annuityâ€ he noted.
He stated that retirees can opt for deferred or immediate annuity depending on the time he wants payment to commence. Payment of benefits under a deferred annuity product is made at a later date while payment commences immediately under an immediate annuity product.
Annuity can also be arranged based on the expected duration of payment as in life annuity which depends on the retireesâ€™ survival and stops when he dies even as a retiring worker can go for annuity certain where payment of benefit is made for a specific period of time irrespective of death, he explained.