In the event of death, it is always a herculean task for beneficiaries to access pension benefits of the deceased. Ronke Adedeji, Managing Director of Leadway Pensure Limited, a Pension Fund Adminstrator, PFA, in this interview harps on the need for pension contributors to always update their information. Excerpts.
By Rosemary Onuoha
WHAT are the challenges people confront while trying to access death benefits?
The most important thing about death benefits is knowledge. Most of the time when people are registering on the Contributory Pension Scheme, CPS, the last thing they are thinking about is death. They are not even thinking about retirement because sometimes people still have years to go. So people complete the information without really thinking about the end.
So, they may use a next-of-kin that is not really the ideal. Another issue that happens is that, overtime, you can put a next-of-kin today but maybe a few years down the line, that person is no longer your ideal beneficiary. The person may even pass away, so that comes down to the issue of data update. Clients are obligated to keep their information up to date with us, but that does not happen.
So what will now happen is that a few years down the line when the unexpected happens, families are left with a mess on their hands. It is rather unfortunate because we see many instances where, maybe the next-of-kin is somebody who, had the person really taught about it, wouldn’t have been put down as the beneficiary.
The best the Pension Fund Administrators, PFAs, can do really is to engage the family. We have had situations where we had to engage the entire family, make them sit together, discuss and make them come to some kind of arrangement or understanding.
Arrangement or understanding
At the end of the day we will follow the law. So the next-of-kin has the right to go and begin the process of getting the Letter of Administration, LoA, if there is no will. Then whoever comes out as the administrator on the LoA now has the authority to administer the estate or whatever funds are there.
Yes, it can be very challenging, it is usually very traumatic, very sad, and there are too many examples. I had a police widow with so many children, and the next-of-kin, her brother in law refuse to give her any of the money. And she was so distressed because she did all the running around to process it because we put her through, we helped her.
When you have situations like that it can be very disturbing. At the end of the day, it is really enlightenment that people need to take these things seriously and take ownership and make sure that they keep their affairs in order.
What does the law say about LoA?
With the law you can have a next-of-kin, hence the next-of-kin is who the PFA will contact. The next-of-kin has the authority to prepare the LoA. At that point an administrator will be stated in the LoA in the event that there is no will which is usually the case. So it is the name on that legal document that we will pay the money to.
How does PFAs assist a retiree collect his entitlements in the event of shortfall?
We usually come in, particularly on the private sector side. With the public sector PenCom assist with that. We just follow up with PenCom but PenCom will follow up on the government to get any shortfall on accrued rights. On the private sector, we follow up on the employer. But most employers, at the end of the day all we can do is hand them over to the recovery agent that PenCom has if they refuse to remit.
If the person is not deceased, fine. Because then you will go and face the employer and say, ‘look, you owe me money, can I have the balance of my account’. We follow up with visits, letters, but sometimes it can be very difficult to get that money from the employer, the best time to get your money is when you are working.
Do you abandon the retiree to contend with the employer alone?
We join. Really, the employee or beneficiary or the account holder is the best person to get that money. It is better to get it when you are working because when you stop working it becomes hard and the employer can just treat you anyhow. Then, it is a difficult situation. But we definitely get involved. We get involved when the person is working because we have a way of ascertaining if you have registered with us and your account is not funded. We know and we report to PenCom and we follow up. Don’t forget we have interest in the account being funded. So we follow up very actively. So for us the work is even when the person is working and not when you have gone. It is harder when you have left work.
Still in the private sector, how do you get those that are not yet registered in the scheme to do so?
It is an ongoing process but it is getting better. It is slow but it is an ongoing process. People are beginning to know their rights because the law requires that employers must fund RSAs. So more people are getting enlightened and are even registering, not even asking their employers.
In the early days, people were taking permission from their employers. These days, people will register and demand contribution from the employer and we also will turn up to say, ‘look, people have registered, can you please fund these accounts.’ So it is an ongoing process. Hopefully as the economy improves, businesses get better, there will be more compliance.
PenCom recently enhanced pension payment for retirees, who are those excluded?
The way that works is that it is not automatic. It depends on how long you have been on the scheme and how your account has grown. So what PenCom did was just to look at peoples balances and found that with a number of people, because they have been on the scheme a long time and their account have earned income, the balances have increased appreciable.
So based on that, PenCom was able to increase their pension benefits. But it is an ongoing process. Over the years, I don’t know how often they will do it, but from time to time, they will go back again. People who didn’t qualify, maybe because they just joined, will qualify.
Even somebody who is already enhanced can in a few year from now, come back and take another enhancement because the income have been growing on their account so their funds are growing. We find that sometimes, people have just been drawing from their income without even touching their principal. So there is room for people to take more.
That is what PenCom has tried to do. I believe that is an ongoing process. Anyone, who has not qualified should be patient and the likelihood is high that overtime, they will eventually qualify.
More retirees are embracing annuity against programmed withdrawal, is that a threat to programmed withdrawal?
To some extent you could say it is. But what you will find is that the two products are different. I always tell my customers that it depends on your risk profile. At a certain level, it is important for you to know that you have pension for life.
But if your RSA account is one of the sources of your retirement income, then you are happy to leave it on programmed withdrawal because with programmed withdrawal you can actually see the balance.
You can monitor it, you can see the income, whereas with annuity, you cede the balance over to the insurance company, you no longer have access to that money. Whether it is growing or making plenty money, you cannot do anything about it. Whereas with the programmed withdrawal, we are talking about enhancement, I don’t see how annuity can enhance. Am sure they are thinking now of how they will do it.
How they will find a way, I don’t know. But with programmed withdrawal, you see your money and you see the income on it, you see that it is growing and you are drawing from it. So it depends on your risk profile, appetite as person and how you want to position. So we have people who embrace programmed withdrawal very well and you can’t convince them to go to annuity.