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PenCom rubbishes NASS plan to alter pensioners’ RSA withdrawal pattern

…Says it will deny pensioners adequate periodic income

By Victor Ahiuma-Young

NATIONAL Pension Commission, PenCom, has faulted ongoing moves to amend the Pension Reform Act, PRA 2014, to provide for definite percentage a retiree can withdraw from his Retired Saving Account, RSA among others.

A cross section of pensioners in Nigeria protesting unpaid benefits among other grievances

It said, it will among others, deny pensioners adequate periodic income.

The commission’s position is contained in a memorandum submitted to Senate  on Establishment and Public Service at Public Hearing on A Bill for an Act to amend the PRA 2014, to provide for definite percentage a retiree can withdraw from his Retired Saving Account, RSA among others

In the presentation by its Acting Director General, Aisha Dahir – Umar, urged the lawmakers to “disregard the Bill and, instead, seek for the implementation of the provision of Section 4(4)(a) of the PRA 2014 on the payment of additional benefits by the employer as well as the institution of the Zero Pillar pension in Nigeria.”

According to the commission, a “review of the title of the Bill reveals that it is meant to amend the PRA 2004 “to provide for definite percentage that a retiree can withdraw from the Retirement Savings Account”.

This appears to be at variance with the explanatory memorandum to the Bill which provides that “the Bill seeks to provide succour to retirees in the delay and other difficulties they are encountering in withdrawing their savings from the Retirement Savings Account”. This indicates an apparent disconnect between the intention of the Bill and what its sections actually provide.”

Negative implications of the proposed amendment

Among others, PenCom after critically analyzing section by section and clause by clause of the proposed amendment, laid bare the negative implications of the proposed amendment, insisting that ” in the near future, there will be huge cries for Government to provide more funds for pension payment to augment the meagre amount to be taken as monthly pension as a result of the proposed Bill.

This is demonstrated by the outcome of a simulation exercise undertaken by the Commission on the application of this proposal on some live data.

For instance, a retiree with RSA Balance of N14,008,353.65 and monthly salary of N114,036.56, took under the present dispensation, a lumpsum of N7,004,176.83 and monthly pensions of N58,099.33.

” If the proposed 75% is applied, he would take N10,506,265.24 as lumpsum and N29,041.38 as monthly pensions. This would automatically make him a proponent of the clamour for exemption or enhancement of pensions in whatever way.

Furthermore, such person would seek to be accommodated under the Minimum Pension Guarantee (MPG), thereby exerting more pressure on the funding requirements for the take-off of the MPG. It is important to note that the MPG is yet to take off largely due to lack of funding from the Federal Government.

“The proposed amendment in Section 2(c) of the Bill seeks to exclude “persons who retire before the age of 50 years in accordance with the terms and conditions of employment” from accessing the RSA in line with Section 7(1) of the PRA 2014. The amendment seeks to equate and treat this group of retirees as similar to employees who disengage or are disengaged from employment before the age of 50 years and are unable to secure another employment within four months. It should be noted that the latter group of employees are only allowed to withdraw an amount of money not exceeding 25 percent of the total amount in the RSA.

The Bill seeks to treat this group as similar to the employees who have retired in a normal way in accordance with the terms and conditions of their employment. We are, therefore, of the considered opinion that this proposed amendment would be unfair and should not be accepted.”

Absence of security benefits

The Commission contended that it “believes that the absence of other social security benefits in Nigeria is partly responsible for the clamour by the retirees to access substantial amounts as lump sum from their RSA balance.

Therefore, there is an imperative need for Nigeria to institute a Zero Pillar Pensions in the form of social security benefit, which is recognised and provided for under Section 16(2)(d) of the Constitution of the Federal Republic of Nigeria 1999 (as amended). If implemented, it will go a long way to alleviate the sufferings of all Nigerians irrespective of whether or not they had a formal employment. It will also augment earnings from occupational pensions.

“The proponents of the 75% lump sum advance the argument that Pension Fund Administrators (PFAs) either do not make any income or make insufficient income on investment of pension assets that does not outperform inflation. Examples were given on how retirees could invest better in fixed income securities should they have access to their funds.

We believe that this simplistic analogy can hardly stand technical financial scrutiny. However, it is important to note that Retiree Pension Fund is also being invested in mostly fixed income securities such as Treasury Bills and other Federal Government securities.

“It is worthy of note that pension funds are invested in line with Regulations issued by the Commission and they do earn fair income, which is credited to the benefit of the individual RSA holder in line with the provision of Section 83(1) of the PRA, 2014. The Commission, in its regulatory oversight, ensures strict compliance with the section and the amount of income earned from investment, which is credited to the RSA holder, is clearly stated on the RSA Statement.

Rather than canvass for payment of 75% lump sum, we believe that the remedy lies in the implementation of the provision of Section 4(4)(a) of the PRA, 2014 dealing with payment of additional benefits upon retirement. It provides that “notwithstanding any of the provisions of this Act, an employer may elect agree on payment of additional benefits to the employee upon retirement”. This would enhance the amount that employees may receive as lump sum upon their retirement.”

PenCom argued that “experience has shown that about 99% of the retirees who collected huge lump sums from their RSAs squandered the money quickly after retirement and left with meagre amounts as pensions.

This category of pensioners are currently bitterly complaining against their low pensions and advancing this situation as justification to calls for exemption from the CPS. We therefore believe that it is not in the overall interest of the retiree to saddle him with the responsibility of managing 75% of his total benefits after retirement, when he should have been resting and enjoying the fruits of his long years of labour.”


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