Retiree Pack: A Guide Under the Contributory Pension Scheme



THE Pension Reform Act 2014 established a Contributory Pension Scheme (CPS). In line with the provisions of Section 7(1) of the Act, retirees are given two retirement benefit modes, which are Programmed Withdrawal (PW) and Retiree Life Annuity (RLA). Consequently, a retiree is required to choose between the two modes by which his/her retirement benefits shall be paid.

PW is provided by Pension Fund Administrator, licensed and regulated by the National Pension Commission (PenCom) while RLA is provided by Retirement Life Insurance Company, licensed and regulated by the National Insurance Commission (NAICOM).

The two regulatory agencies jointly issued RETIREE PACK on 1st September 2020. The Retiree Pack is a guide to help prospective retirees make informed decisions on the mode of receiving their retirement benefits under the CPS. The Retiree Pack addresses the frequently asked questions in relation to PW and RLA while providing the list of things to be done by a prospective retiree. It also specifies the features of PW and RLA.

Frequently Asked Questions

The Retiree Package addresses Frequently Asked Questions, which is a list of answers to common, reoccurring questions that agitate the minds of employees, who are contributors and beneficiaries of the CPA. These questions include.

What is Programmed Withdrawal?

This is a stream of income paid by a Pension Fund Administrator to a retiree on monthly or quarterly basis determined using a Programmed Withdrawal template over an expected life time.

What happens to the balance in the Retirement Savings Account (RSA) under PW?

The RSA balance is being re-invested by the PFA to generate more income/funds for the retiree. When a retiree dies, any balance in the RSA will be paid to the named beneficiary(ies).

What is Retiree Life Annuity?

This is a stream of income purchased from Life Insurance Company with the available RSA balance under the CPS as premium. It provides a guaranteed periodic income (pension) to a retiree throughout his/her life after retirement. Annuity is guaranteed for ten years. If the retiree dies within the first ten years of retirement, the monthly annuity will be paid to his beneficiary(ies) for the remaining years up to ten years at a present value.

How can annuity be purchased?

A retiree can buy annuity by remitting his/her available RSA balance as premium to a Retiree Life Annuity Provider (Life Insurance Company) with the commitment to provide monthly /quarterly annuity payment for life.

Who regulates Retiree Life Annuity?

The regulations on RLA are jointly issued by PenCom and NAICOM.

Can I choose PW and later change to RLA?

A retiree on PW can change to RLA. This can be done after at least 1 year of being on PW.

How can the change be effected?

A retiree can request the PFA to transfer his RSA balance to his chosen Retiree Life Annuity Provider (RLA Provider), giving the PFA one month’s notice.

Can I change from RLA to PW?

A retiree on RLA cannot change to PW. This is because RLA is for life.

Can a retiree on PW change his PFA?

Section 13 of the Pension Reform Act 2014 states that a holder of a retirement savings account may not more than once in a year, transfer his account from one PFA to another.

Can a retiree on RLA change his RLA Provider?

A retiree on RLA can change his RLA provider after at least two years of being with the current RLA provider with the approval of NAICOM.

What happens where a retiree who is on PW exhausts the balance in his/her RSA?

A retiree whose RSA balance is exhausted may be eligible for payment of Guaranteed Minimum Pension (GMP) through the implementation of the Minimum Pension Guarantee (MPG).

What is MPG?

MPG is an arrangement to provide Guaranteed Minimum Pension (GMP) to eligible retirees.

Can RLA be exhausted?

The risk having been transferred to RLA provider, RLA cannot be exhausted.

What is Guaranteed Minimum Pension?

Guaranteed Minimum Pension is the lowest benchmark of pension which an eligible retiree under CPS should receive as pension.

Where can a retiree on PW take his/her complaint to?

A retiree on PW is expected to take his/her complaint to the PFA for resolution. However, where the retiree is not satisfied with the response of the PFA, he/she can seek the intervention of PenCom.

Where can a retiree on RLA take his complaint to?

A retiree on RLA is expected to take his/complaint to the RLA provider for resolution. However, where the retiree is not satisfied with the response of the RLA provider, he/she can seek the intervention of NAICOM.

What are the Components of RSA balance at Retirement?

The RSA balance at retirement is made up of the following:

  1. Pension Contributions from July 2004 till date of retirement;
  2. Accrued right (if any), representing pension and gratuity for services rendered from date of first appointment to 30 June, 2004;
  • Investment income generated by the PFA;
  1. Voluntary contributions (if any);
  2. Micro pension contribution (if any);
  3. Nigeria Social Insurance Trust Fund (NSITF) (if any).

How is the RSA balance utilised at retirement?

At retirement, the balance in the RSA of a retiree, after the payment of lump sum and pension arrears (if any), is used to procure an annuity for life of the retiree or a programmed withdrawal over an expected life span of the retiree.

What percentage of the RSA balance can a retiree take as lump sum?

There is no fixed percentage for lump sum payable to retiree. Lump sum is developed using the RSA balance, age, gender and final salary of the individual retiree. However, the retiree can chose between a zero lump sum and a maximum lump sum calculated using the PW template before the purchase of either PW or RLA.

How does lump sum affect the PW pay out of a retiree?

There is an inverse relationship between the amount paid out as lump sum and periodic benefit pay out. Where a retiree receives a maximum allowable lump sum, he shall be entitled to the minimum monthly/quarterly pension and vice versa.

How does lump sum affect RLA pay out of a retiree?

The higher the lump sum received, the lower the available RSA balance for premium, therefore lower monthly/quarterly annuity and vice versa.

How is periodic pension determined?

Periodic pension (monthly or quarterly pension) is determined using the following individual retiree’s data:

  1. Age at Retirement;
  2. Gender;
  • RSA Balance;
  1. Annual Total Emolument (ATE);
  2. Retiree’s choices

Does the CPS allow a retiree to withdraw the entire balance in his/her RSA at once?

Only retirees with RSA balance of N550,000.00 and below are allowed to withdraw their RSA balance at once subject to PenCom’s review from time to time.

Can I use my RSA balance as collateral for loan?

Pension fund assets cannot be applied for loans or credits or as a collateral for any loan taken by the holder of the RSA.

How and when can an RSA holder access his/her RSA?

The balance in the RSA can be accessed at retirement or on attaining the age of 50 (whichever is later), at death of RSA holder or at disengagement from employment before the age of 50 years. Where the RSA holder is less than 50 years of age he can withdraw 25% of his RSA balance after 4 months of job loss.


It is hoped that the above answers to frequently asked questions, which commonly agitate the minds of prospective retirees, will guide them to make informed decisions on the mode of receiving their retirement benefits under the CPS. Next week, we will be discussing the Role of a retiree and features of PW and RLA. The Retiree Pack is on the websites of both Agencies.


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