CheerY news came to pensioners who are on Programmed Withdrawal under the Contributory Pension Scheme managed by Pension Fund Administrators (PFAs) as the year 2017 came to an end.
The National Pension Commission (PenCom) announced a maiden pension enhancement for this category of pensioners with effect from December 2017, with subsequent reviews to be advised by PenCom from time to time.
The announcement was contained in a framework on the issue released by PenCom to Pension Fund Administrators and Pension Fund Custodians.
The objective of the framework is to provide uniform modalities for the implementation of periodic pension enhancement for the affected category of pensioners, using the surpluses generated from the return on investment, and the Retirement Savings Account (RSA) balance as at 31 December, 2016 as the basis for the enhancement. Section 115 of the Pension Reform Act 2014 (PRA 2014) confers on PenCom, powers to make regulations, rules or guidelines as it deems necessary or expedient for giving full effect to the provisions of the Act.
The current enhancement, from the information gathered by the Centre for Pension Right Advocacy appears to be a token, which may not meet the yearnings and expectations of these pensioners. However, it resolves issues around Programmed Withdrawal, arising from misinformation from certain quarters.
Section 7 subsection 1 of the PRA 2014, provides that a contributor on retirement, is expected to withdraw a lump sum from the total amount in his/her RSA, and will use the balance for either a programmed monthly or quarterly withdrawals calculated on the basis of an expected life span or purchase a life annuity from a life insurance company licensed by the National Insurance Commission.
Since the commencement of the Contributory Pension Scheme in 2004, the public, especially contributors who are about to retire or retirees who had chosen Programmed Withdrawal were and continue to be misinformed that benefits under Programmed Withdrawal terminates after 15 years.
We differ from this position, as there is no legal or administrative foundation for this assertion. The fact is that the balance in the RSA for those who chose Programmed Withdrawal after the initial lump sum withdrawal, remains the money of the account holder. PFAs continue to render quarterly statements of accounts to the holders, which corroborate our position.
Since the PFAs continue to invest the balances in the RSAs, thereby growing the balances in the RSAs, the balances are expected to meet the quarterly or monthly payment of pensions to the holders beyond 15 years. The information the Centre gleaned from statements of account of one of such retiree, substantiate our position. As at March 31, 2014, the balance in the retiree’s RSA was N11,725, 319.49.