VICTOR AHIUMA-YOUNG

About N210.78.63billion has been paid as lump sums to retirees under the Programmed Withdrawal of Contributory Pension scheme., CPS.

Pix: A Protest by Nigeria Union of Pensioners, Lagos state, on non payment of Pensioners arrears and gratuities by Lagos state Government, at Lagos House, Alausa, Ikeja. Photo: Bunmi Azeez

Also, N24.63 billion has been paid as monthly pensions to same retirees as at the end of February 2014.

Similarly, N19.52 billion and N425.53 million have been paid as lump sums and monthly annuities respectively to 8,479 retirees in return for premium payment of N41.63 billion as at the end of February 2014.

Head of Benefits and Pension, National Pension Commission, PenCom, Mr. Olulano Loyinmi, at a Pre-Retirement Workshop for prospective retirees in Lagos, said actual retirement by PW began in 2007, saying “N210.78billion and N24.63biliion have already been approved and paid out as lump sum and monthly pensions to 84,097 retirees under Programmed Withdrawal as at end of February, 2014.

Actual retirement by Annuity commenced in 2010 Sums of N19.52billion and 425.53million already approved and paid out as lump sum and monthly annuities to 8,479 retirees in return for premium payment of N41.63 billion as at end of February, 2014”

Programmed withdrawal

Explaining the features of PW, he said one of the two principal ‘retirement products’ specified by the Pension Reform Act 2004 is a product offered by Pension Fund Administrators, PFAs for periodic payments (monthly/quarterly) to a retiree, a structured periodic withdrawal based on the peculiarities of the retiree.

The Retirement Saving Account, RSA, balance is spread over expected life span of retiree. Money still remains in the account, managed or invested by PFA. Monthly pension of at least 50% of terminal monthly emolument is paid to the retiree and inheritance is bequeathed to beneficiaries if death occurs at any time.

Amount paid is determined by the balance on RSA at retirement, length of time over which payment would be made (employee’s expected life span) and expected life span determined by actuarial table is based on minimum and maximum monthly pension and/or corresponding minimum or minimum lump sum. ”

For him, “Lump sum is residual. No fixed percentage and may be withdrawn before PW or Annuity subject to RSA balance and monthly pension. It is not automatic that retiree must get 50% of RSA balance pension and monthly pension. It is not automatic that retiree must get 50% of RSA as lump sum.”

He said based on knowledge of the above, retirees should ask only for what the law allows and stressed that difference in benefits among “retirees is determined by age at retirement, gender, RSA balance, size of Annual Total Emolument, ATE, retiree’s choices and knowledge of these facts will help retirees manage their expectations better.”

Features of annuity: According to him, “annuity is a product of insurance company. Annuity is a regular income received from an insurance company in consideration for payment of premium. It is only life annuity that is recognised by PRA 2004. The retiree negotiates with insurance company and he or she obtains annuity provisional agreement from insurance company.

Provisional agreement shows premium monthly annuity guarantee terms, etc. After the payment of lump sum, money leaves RSA to insurance company to commence payment of monthly annuity/pension to retiree. The payment is guaranteed for 10 years in case of death and there is no room to bequeath inheritance if death occurs after 10 years.

Transfer of PFA: According to Loyinmi, “A retiree on PW with a PFA can move to another PFA when window opens and the fund is in the RSA of the retiree with PFA. If retiree dies at any time, RSA balance goes to beneficiaries of the deceased as inheritance. Retiree Life Annuity is a product of company insurance where the insurance company pays pension for life. A retiree on Annuity with an Insurance Company can move to another Insurance Company after two years.

The fund is in the Annuity pool insurance company. If retiree dies within 10 years of retirement, monthly annuities will be paid up to 10 years to beneficiaries because annuity is guaranteed for minimum of 10 years but if he dies after 10 years of retirement no inheritance will be passed to beneficiaries.”

Speaking on way forward, he explained that the major challenge facing the product are the “limited public awareness of the workings of the new Contributory Pension Scheme, inadequate communication enlightenment of RSA holders/retirees by PFAs, different interpretation of some provisions of the Act by retirees- there is need for retirees to align with the law, comparison of benefits under the old and new scheme by retirees (the two are different) and comparison of benefits by colleagues on similar position and different variables/data (choice & other variables are different.)

“Relatively small RSA balances of some retirees pending the implementation of minimum pension guarantee, challenges of authenticity/modification of recorded ages by retirees, challenges of alteration of pay slips to collect a higher lump sum, customer service challenges of PFAs leading to influx of retirees into the Commission to obtain clarifications on trivial issues,  misinformation of retirees by PFAs and Insurance Companies in order to gain patronage (please get adequate enlightenment before your decision.)