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Choosing between Programmed Withdrawal and Annuity

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By Rosemary ONUOHA
The Contributory Pension Scheme, CPS, seeks amongst others to ensure that every worker receives his retirement benefits as and when due. Before retirement, as a contributor, you should negotiate with your Pension Fund Administrator, PFA, your preferred mode of withdrawal of your pension when you eventually retire.


The modes of withdrawal are the Programmed Withdrawal and the Annuity and it is entirely your choice to make. Don’t be coerced by the Pension Fund Administrator, PFA, or the insurance company to make a choice.

However, there is a lump sum withdrawal with either the Programmed Withdrawal or Annuity.

Accordingly, six months before your retirement, you should  execute necessary papers with your PFA and give them standard notice of retirement, then you will sign a programmed withdrawal or Annuity agreement which will be approved by the National Pension Commission, PenCom.

Following the approval, the PFA will issue instruction to the Pension Fund Custodian, PFC, which will then commence monthly PW payment through the bank to retiree’s bank account or transfer your pension to an insurance company in the case of an annuity.

Features of Programmed Withdrawal

Programmed Withdrawal is one of the two principal ‘retirement products’ specified by the PRA 2014.

It is a product offered by PFA for a periodic payments (monthly/quarterly) to a  retiree.

It is a structured periodic withdrawal based on the peculiarities of the retiree.

The Retirement Savings Account, RSA, balance is spread over expected life span of retiree.

Money still remains in the account and will be managed or invested by PFA.

Bequeaths inheritance to beneficiaries if death occurs at any time.

Features of Annuity

Annuity is a product of insurance company.

Annuity is a regular income received from an insurance company in consideration for payment of premium.

Only life annuity is recognised by PRA 2014.

Retiree negotiates with insurance company.

Retiree obtains Annuity Provisional Agreement from insurance company.

Provisional agreement shows premium, monthly annuity guarantee terms etc.

Money leaves RSA to insurance company to pay premium after lumpsum payment.

The insurance company then commence payment of monthly annuity/pension to retiree.

Annuity payment is guaranteed for 10 years in case of death.

No room to bequeath inheritance if death occurs after 10 years.

What is a lump sum?

Lump sum is a residual, no fixed percentage amount that may be withdrawn before PW or Annuity, subject to RSA balance and monthly pension.

Based on knowledge of the above, retirees should ask only for what the law allows.

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Your choice to make

The choice of mode of withdrawal of benefits, whether Programmed Withdrawal or Annuity, belongs to you, the retiree.

Your RSA balance determines your pension under the CPS.

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Get proper enlightenment from Pension Fund Administrators before taking decisions.

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