By Victor Ahiuma-Young
THE National Pension Commission, PenCom, has announced and issued for immediate implementation, a revised regulation on retirement and terminal benefits for workers under the Contributory Pension Scheme, CPS.
In the first comprehensive review of the regulation since its initial issuance in 2007, the commission in a statement informed that revised regulation simplifies some difficulties and guides the process of accessing retirement and terminal benefits by pension contributors and retirees under the CPS.
It explained that key stakeholders in the pension industry made inputs to the review designed to ensure a more efficient retirement benefits administration.
The statement noted that the revised regulation contains several new provisions on pension enhancement, voluntary contributions, temporary access to Retirement Savings Account, RSA due to loss of job, payment under the Micro Pension Plan, administrative sanctions for violations by Pension Fund Administrators, PFAs, amongst others.
The regulation also introduces salient amendments to several existing provisions while providing more clarity on others.
Among others, major highlights of the revised regulation include the simplification of the documentation process, non-confirmation of employment status by employers, access to lump sum, RSA consolidation before payment of benefit.
The revised regulation as a way of simplifying the process has now mandated PFAs to make efforts to ensure that all documentation preparatory to the retirement of the RSA holder should be provided and concluded within a period of four months prior to the date of retirement.
This is contrary to the old regulation which commenced upon retirement of account holders.
According to the commission: “In order to ensure that prospective retirees are duly educated on the modes of accessing their benefits, PFAs have also been mandated to advise prospective retirees to check their websites and be acquainted with the CPS Retirement Pack containing features of Programmed Withdrawal, PW and Retiree Life Annuity, RLA at least three months to date of retirement. The pack also contains other salient issues that would guide the retirees towards a smooth retirement process.”
Similarly, the new regulation simplified the provisions on the notification and documentation required for access to RSA due to temporary loss of job, which is defined as a situation “where an employee voluntarily retires, disengages or is disengaged before attaining the age of 50 years and is unable to secure another employment after four months of the disengagement.
“The provision addresses situations where employers refuse to confirm the retirement or disengagement of their former employees. Prior to this revision, a letter of acceptance of resignation or disengagement issued by the employer is mandatory for a pension contributor seeking payment of 25 per cent for temporary loss of job.
“However, the Revised Regulation provides that where the employer fails/refuses to accept the resignation letter from the employee, the PFA shall write the employer confirming the employee’s resignation and ensure that an acknowledgement copy is kept as proof of receipt. Where the employer fails to respond to the PFA’s inquiry within 30 days, the employer’s refusal is taken as acceptance of the employee’s resignation for the purpose of benefits payment.”
On lump sum payment, the new regulation informed that “retirees shall be allowed to access additional lump sum after the payment of initial lump sum where there are additional inflows of funds into the RSA from the employers. The additional remittances shall, however, first be applied to augment pension up to 50 per cent of the retiree’s final salary while the balance may be paid out as lump sum.
“In the situation where a retiree’s pension is already up to 50 per cent of final salary, the retiree may choose to collect the entire additional remittances as lump sum. Where the additional inflow into the RSA of a retiree-on-Retiree Life Annuity, RLA, is not up to 4100,000, the amount shall be paid directly into the retiree’s bank account, subject to the Commission’s approval.
The Revised Regulation has also clarified that the RSA must be consolidated before retirement benefits can be accessed. A retiree shall only be entitled to access his or her retirement benefits upon consolidation of his or her RSA. The components of an RSA at retirement shall consist of accrued pension rights or pre-act benefits (if any) for employees that were in employment before the commencement of the CPS, employer/employee pension contributions, returns on investment and fixed portion of voluntary contributions (if any).
The new regulation mandates the PFA to take necessary steps to liaise with the employer and other relevant parties, to ensure that all the entitlements of a retiree or deceased person is credited to his/her RSA for the purpose of determining the final RSA balance, before processing of benefits.