FORMER board member of National Pension Commission, PenCom, representing organized Labour, Comrade Ivor Takor, has said the failure by employers to remit the pension contributions of workers to the Pension Fund Administrators, PFAs is a big challenge facing the reform, which may affect retirees of non compliant organizations in future.

Comrade Takor who also a former President of the Non-Academic Staff Union of Educational and Associated Institutions, NASU,  made the assertion while presenting a paper on “Pension Reform in Nigeria : Effect on Financial Well being on current and Future Retirees”, at the Certified Pension Institute of Nigeria, CPIN, national workshop on securing effective and blissful retirement, held in Lagos.

*Ivor Takor

According to him, “Pension reform in Nigeria is still too recent for a better evaluation regarding the effect on the financial well being of retirees. Only after a relatively long period of time will it be possible, to know the real impact of the reform on the living conditions of retirees.

There is however, a fundamental matter, which is creating conditions for workers to generate sufficient savings in their Retirement Saving Accounts, RSAs. Such an environment can only be derived through higher levels of work-related revenue or other forms of remuneration.

There is also a need to link pension reform with a more encompassing social security reform, including those of health and housing if the financial well being of retirees is to be guarantee and sustained.”

Comrade Takor contended that “Pension is the most visible programme of any social security scheme providing protection to citizens from old age poverty. Until the enactment of the Pension Reform Act, PRA, 2004, pension in Nigeria had a limited coverage, covering only workers in the formal sector (public service and organised private sector), leaving workers in the informal sector without any pension protection.

Tracing PRA 2004, the former labour representative of the board of PenCom, explained that “Section 4 (1) provides that a holder of a retirement savings accountant upon retirement or attaining the age of 50 years whichever is later.

Shall utilize the balance standing to the credit of his retirement savings account for the following benefits; Programmed monthly or annual withdrawals calculated on the basis of an expected life span, Annuity for life purchased from a life insurance company licensed by the National Insurance Commission with monthly or quarterly payments and A lump sum from the balance standing to the credit of his retirement savings account: provided that the amount left after the lump sum withdrawal shall be sufficient to procure an annuity or fund programmed withdrawals that will produce an amount not less than 50 per cent of his annual remuneration as at the date of retirement.

A retiree who receives a lump sum can invest the money in practically anything and this freedom of choice is appeals to lots of retirees. Retirees in most cases use the fund to build houses, purchase cars or establish small business.

Programmed withdrawal is a method by which the employee collects his retirement benefits in periodic sums spread through the length of an estimated life span.”

“An annuity is an income purchased from an approved life insurance company which provides monthly or quarterly income to retiree during his/her lifetime. Annuity is new in Nigeria. Therefore for the implementation of Section 4(1)(b) of the Act, the National Pension Commission in collaboration with the National Insurance Commission have put together guidelines on annuity.

Actuaries at Insurance firms estimate how long employees typically live and use those estimates to determine the level of monthly annuity payments. The fund runs out of money before the annuitant dies and the insurance company must cover the shortfall.

If payments are too low, no one will opt to buy the contract. Annuity pension plan use gender neutrality tables, which mean they assume men and women, live to the same age, even though statistically women live longer. Therefore annuity can be more attractive for women than men.”


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