By Victor Ahiuma-Young
SECTIONS 7 and 16 of Pension Reform Act, PRA 2014, explain how a Retired Savings Account, RSA, can be assessed by an RSA holder or his or her beneficiary.
The National Pension Commission, PenCom, at Pre-Retirement Workshop 2019, for prospective retirees, in Ilorin, Kwara State, gave insight into the conditions of accessing RSA as spelt out by the PRA.
According to the commission, the conditions include mandatory retirement and retirement based on health grounds, saying an RSA holder can access his benefit when he or she clocks 50 years or attain the mandatory retirement age (generally 60 years in the public sector) whichever is earlier.
The RSA can also be accessed at retirement from service on attainment of a maximum allowable length of service (generally 35 years in the public sector). It can also be accessed at attainment of 70 years for Academic Staff in the professorial cadre, attainment of 65 years for non-academic staff of tertiary institutions.
Other conditions include retirement based on health grounds, temporary Access to 25 per cent of RSA balance, Voluntary Contribution, deceased (Death) Benefits.
According to sections 16 (2) (a) of PRA 2014, retirement on medical grounds can be based on advice of a Physician/Medical Board, due to total/ permanent disability of body/ mind. In this case, affected person can access RSA before attaining 50 years of age, entitles Retiree/RSA holder to full Retirement Benefits.
There is also retirement based on terms and conditions whereby an RSA holder retires before 50 years in line with terms and conditions of employment.
On temporary access (25%) according to Section 7(2) & 16(2)(5) PRA 2014, this is the benefits paid to employees who lost their jobs and have not been able to secure another job after the period of four months from disengagement. The essence is to cushion the livelihood of the applicant. Such an RSA holder can resume contribution upon getting a new employment. It is determined based on the existing RSA balance at the time of request.
Additional Funds remitted into RSA after payment of 25% shall not be accessed until RSA holder attains 50 years for payment of lump sum and pension either as Programmed Withdrawal or Annuity. 25% of RSA balance can only be withdrawn once in a life time before RSA holder turns 50 years
For Voluntary Contributions, VC, Section 4(3) of PRA, 2014 allows the contributors to voluntarily contribute in addition to the mandatory contributions into their respective RSA in order to augment their pension at retirement. Similarly, Section 4(7) allows exempted employees from CPS to participate voluntarily in the CPS subject to the issuance of guidelines by the PenCom. The allowable VC deduction from employee monthly payroll shall not be more than one-third (1/3) of monthly emolument in accordance with Section5 (7) of the Labour Act Charter 198 laws of the Federation of Nigeria 1990. Withdrawal of VC shall be once every two years from the last approved withdrawal date. Subsequent withdrawals shall only be on the incremental contributions from the date of last withdrawal.
For mandatory contributors, the amount remitted as VC shall be separated as follows; 50% shall be treated as contingent, available for withdrawal every two years. Taxes would be deducted on income in line with Section10 (4) of PRA 2014. The balance of 50% shall be fixed for pension and utilised at date of retirement to augment the contributor’s retirement benefit
According to the commission, for exempted contributors, the following shall apply; the timeframe of withdrawal is once every two years. The contributor can withdraw all the funds in his/her VC after two years of contribution subject to deduction of taxes on both income earned and principal when withdrawal is less than five years of contribution in line Section 10 (4) of PRA 2014.The tax shall be computed using the Table of Rates specified in the Personal Income Tax Act (PITA Act 2011)
Deceased (Death) Benefits
PenCom says this represents benefits of a deceased person which is to be paid to the estate of the deceased or his legal beneficiaries. The benefits include: •Accrued rights i.e. His entitlement prior to June 2004, contributions from July 2004 to month of death and return on investment.
Where all the components have been consolidated, benefits may be paid en-bloc or where part of the components is yet to be credited into the RSA, the portion remitted would be paid pending the balance, Proceeds of Group Life Insurance Policy (three-times the annual total emoluments) if death occurs while in active service and Proceeds are no longer paid into RSAs but are to be paid directly to legal beneficiary, an underwriter to a named beneficiary.
According to the commission, missing person’s benefits is similar to death benefits claim. The employer of the missing person shall report immediately to the employee’s PFA, Insurer and PenCom. Employer shall advise PenCom to constitute Board of Inquiry, BOI, on the missing person. Board of Inquiry decision shall be communicated to PFA/MDA It is payable to the estate/beneficiary of a missing person.