By Ahiuma-Young

SINCE the advent of the Contributory Pension Scheme, CPS, following the Pension Reform Act, PRA, 2004, (as amended), many  contributors or enrollees, who have sought to make Voluntary Contribution, VC, to boost their retirement saving account, RSA, have been given the opportunity to do so by the provisions of the 2014 PRA.

*Acting Director General of PenCom (fourth from right in the front) and some staff of PenCom with a delegation of the Jigawa (State and Local Government) Contributory Pension Scheme Board, during a visit to PenCom .

The importance of VC is that enrollee can decide how much he or she wants to contribute additionally apart from the mandatory contribution, towards saving for a better retirement life.

Before the coming of VC, enrollee was limited to eight percent contribution while his or her employer contribution is 10 percent.

The Pension Reform Act (PRA) 2014 allows employees to make, Voluntary Contributions into their Retirement Savings Account, RSA, in addition to their mandatory pension contributions, with the sole aim of enhancing their retirement benefits. Voluntary Contributions under these Guidelines shall be non-obligatory contributions made by any employee in the formal sector through the employer.

According to PenCom, the objectives of VC is to establish uniform set of rules for the operation of Voluntary Contributions and eligibility criteria for participation in Voluntary Contributions, provide the procedure for making VCs, provide necessary safeguards and modalities for its withdrawals, to utilized VCs for the purpose of enhancing future retirement benefits for active or mandatory contributors.

Better retirement life: Voluntary contribution to the rescue

It is also to encourage retirees under CPS, utilize part or all of the VCs to augment their existing pension and to assist retirees under defunct Defined Benefit, Exempted Persons and foreigners to save in order to cater for their livelihood during old age

As part of efforts at a seamless scheme, the National Pensions Commission, PenCom, in guidelines released for participants, informed that employees can make VC into their RSA besides mandatory pension contributions.

PenCom speaking through its Head, Corporate Communications, Mr Peter Aghahowa, informed that PRA 2014 permits employees to make VC into RSAs besides the mandatory pension contributions.

Aghahowa said the sole aim of the VC is to enhance retirement benefits of Nigerian workers after retirement.

He said: “It is pertinent to note that the PRA 2014 permits employees to make voluntary contributions into their RSA in addition to the mandatory pension contributions to enhance retirement benefits. The contributions must not necessarily be made through the employer.”

Aghahowa said the guidelines spelt out criteria for participation included eligibility, procedures for contributions, safeguards and modalities for its withdrawals.

According to him,said other objectives of such contributions are “to assist retirees under the defunct Defined Benefit Scheme, DBS, exempted from the Contributory Pension Scheme, CPS, and foreigners to enhance savings for livelihood at old age and to encourage retirees under CPS to utilise part or all of the Voluntary Contributions to augment their existing pensions.”

He urged  contributors to be guided by the guidelines and direct further enquiries on VC to their respective Pension Fund Administrators (PFAs).

PenCom further urged the contributors to obtain full guidelines from the commission or their PFAs

Recall that  PenCom recently issued a circular to curb the high rate of incessant withdrawals by contributors to VC.

Speaking on the circular in Lagos,  Acting Director-General of PenCom, Aisha Dahir-Umaru noted that the main thrust of the circular, released by the commission in November 2017 stated : “That 50 per cent of the VCs can be withdrawn once in every two years.

Also, every subsequent withdrawals will be on incremental contributions from the last withdrawal. Furthermore, the remaining 50 per cent of the VCs shall be domiciled for augmenting pensions at old age.

“The circular issued was necessitated by the observed incidences of high rates of withdrawals from VCs by contributors. The incessant and high withdrawals negated the main purpose of using such contributions to augment pensions at old age.”

Represented by the Head, Contribution Bond Redemption Department, Mr Olulana Loyinmi, Dahir-Umaru added that the commission deemed it fit to ensure strict adherence to Anti-Money Laundering provisions and relevant tax laws.