Retiree Pack: Guideline For Retirees Under The Contributory Pension Scheme: Part II

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Introduction

LAST week we discussed “Frequently Asked Questions” as addressed in the Retiree Pack, which is a guide for retirees under the Contributory Pension Scheme (CPS) issued by the National Pension Commission (PenCom) and the National Insurance Commission (NAICOM), the regulators of Pension Fund Administrators (PFAs) and Life Insurance Companies that provide Programmed Withdrawal (PW) and Retiree Life Annuity (RLA) respectively.

Today we will be discussing the role of retirees and the features of PW and RLA as captured in the Retiree Pack.

Role of a Retiree

The following actions are to be undertaken by a prospective retiree in order to facilitate the process of payment of his/her retirement benefits:

  1. Actions to be taken by a potential retiree
  2. Obtain and peruse the Retiree Pack;
  3. Within 6 months to retirement, the Retirement Savings Account (RSA) holder shall submit the following documents to the PFA:
  • The official notice/acceptance of retirement from his/her employer;
  • Current pay slip or any other evidence of total annual remuneration/Grade level and step; and
  • The evidence of accrued pension rights (if any) or acknowledgement of indebtedness (for employees in the Treasury Funded Organisations).

ALSO READ: Retiree Pack: A Guide Under the Contributory Pension Scheme

  1. Action to be taken by a retiree
  • Obtain data confirmation letter from PFA;
  • Obtain and complete standard notification from PFA;
  • Seek financial advice from both PFA and RLA provider;
  • Choose mode of pension payment, i.e. Programmed Withdrawal (PW) or Retirement Life Annuity;
  • Complete and execute a Programmed Withdrawal Agreement with the PFA if he/she wishes to receive his monthly or quarterly pension by way of Programmed Withdrawal; and
  • Obtain an RLA Provisional Agreement from the RLA provider of choice, complete, sign and submit to the PFA if he or she wishes to receive his monthly or quarterly pension by way of RLA.

Features of Programmed Withdrawal and Retiree Life Annuity

S/N PROGRAMMED WITHDRAWAL RETIREE LIFE ANNUITY
1 A product offered and administered by PFAs A product offered and administered by Life Insurance Companies (Retirement Life Providers)
2 Regulated by PenCom Regulated by NAICOM
3 Pays monthly/quarterly pension over an expected life span as determined using the A (55) Tables of Annuitants Ultimate rates published by the Institute and faculty of Actuaries of United Kingdom (as amended). Pays monthly/quarterly Annuity for life as determined using usually the PA (90) Tables of Annuitants Ultimate rates published by the Institute and Faculty of Actuaries of United Kingdom (as amended).
4 The balance in the RSA is re-invested by the PFA to generate income/funds for the retiree. The profit/loss on investment is credited into the retirees RSA. The premium is transferred to a Retiree Life Annuity Pool and invested to generate income for the pool.
5 Retiree may benefit from periodic pension enhancement resulting from returns on investment of the pension funds in their RSAs. Periodic pension enhancement may be applicable depending on the type of RLA purchased.
6 Balance of retirement benefits remain in the retiree’s RSA and RSA statement of accounts is issued to retirees quarterly or on request. Retiree receives monthly/quarterly annuity as long as he/she is alive.
7 Retiree may move from Retiree Life Annuity after one year of being under Programmed Withdrawal. A retiree on RLA cannot move to programmed withdrawal but may change to another RLA provider after at least two years with existing RLA provider.
8 In case of death of a retiree, the legal beneficiary(ies) will be paid the total RSA balance. In the case of death of an annuitant, RLA is guaranteed for at least ten years. On demise of the annuitant within the guaranteed period, the RLA provider would pay in bulk the sum of annuity for the remaining guaranteed years, at a present value to the named beneficiary(ies).
9 The RSA balance under programmed withdrawal can be exhausted and resort be made to Minimum Pension Guarantee (MPG). RLA are not exhaustible, provided the retiree is still alive.
10 Retiree and PFA share risk. Risk is transferred to the RLA provider.

Conclusion

The above concludes our discussion on the Retiree Pack. The reactions and feedbacks from some workers and retirees to our discussions on the Revised Regulation on Retiree Life Annuity and the Retiree Pack is a clear indication that the guidelines will go a long way to address challenges faced by prospecting retirees and retirees. We appreciate all the WhatsApp, emails and calls received with regards to the guidelines. Once more, we wish to remind all that the guidelines are on the websites of both PenCom and NAICOM.

ALSO READ: Pension Reform Act 2014: The Revised Regulation on Retiree Life Annuity

Re-constitution of the Board of the National Pension Commission

IT came as a big relief when it was announced as breaking news on Monday 29th

Hajia Aisha Dahir Umar

September, 2020 that President Muhammadu Buhari has appointed a Chairman, Director General and four Commissioners for the National Pension Commission (PenCom subject to the Confirmation of the Senate, and that the names of the appointees have been forwarded to the Senate in line with Section 19 (3) of the Pension Reform Act 2014.

The Section provides that: “The Chairman, Director-General and the Commissioners shall be appointed by the President subject to the confirmation by the Senate.”

Section 19 (2) provides that the Board of the Commission shall consist of (a) a part-time Chairman who shall be a fit and proper person with adequate cognate experience in pension matters; (b) the Director-General of the Commission; (c) four full-time Commissioners of the Commission; (d) a representative each of the following agencies and institutions: Head of the Civil Service of the Federation; Federal Ministry of Finance; Nigeria Labour Congress; Trade Union Congress of Nigeria; Nigeria Union of Pensioners; Nigeria Employers Consultative Association; Central Bank of Nigeria; Securities and Exchange Commission; Nigeria Stock Exchange; and National Insurance Commission.

ALSO READ: Pension Reform Act 2014: The Revised Regulation on Retiree Life Annuity: Part II

By the organogram of PenCom, the Commissioners, who together with the Director-General, are members of the Executive Committee of PenCom, will be heading various departments of the Commission.

Under their watch, small and medium enterprises are increasingly embracing the CPS; expanding the coverage of the CPS through the Micro Pension Plan, which as at June 2020, witnessed 51,974 informal sector workers enrolling into the CPS, contributing N42.1 million; under their watch, RSA registration grew to 9, 039,727 as at second quarter of 2020 growing pension assets to 11.08 trillion naira during the same period; and by ensuring that pension operators are managed by fit and proper persons, thereby ensuring that the industry continue to be insulated from fraud and maladministration thereby securing pension fund and assets.

The Board of PenCom was dissolved in 2015 or thereabout and for almost five years, the Commission has been without a Board. It has become a convention in Nigeria that once a new administration is sworn in at the federal level, all Governing Boards of Federal Government Agencies are dissolved and reconstituted at the pleasure of the President. In the absence of the Board, PenCom has been managed by a Director-General and currently by an Acting Director-General.

ALSO READ: Expanding the Coverage of the Contributory Pension Scheme Through Micro Pension Plan

It is important to note that out of a Board membership of sixteen, ten of are Institutional representatives of critical stakeholders in the pension industry, whose inputs are critical in the formulation and provision of general policy guidelines for the discharge of the functions of PenCom; monitoring and ensure the implementation of policies and programmes of the Commission; and carrying out such other functions as necessary or expedient to ensure the efficient performance of functions of the Commission under the Act.

It wasn’t only the absence of the Board that was a setback to the work of PenCom. Pencom for the years that there was no Board, had no Executive Committee.

It is to the credit of the Acting Director-General of PenCom, Aisha Dahiru-Umar, and members’ of the Management Team, that PenCom has been able to move the pension industry forward through effective regulation and supervision of the industry; ensuring increased level of compliance by private sector employers.

ALSO READ The Need for Review of Pension Reform Act

Under their watch, small and medium enterprises are increasingly embracing the CPS; expanding the coverage of the CPS through the Micro Pension Plan, which as at June 2020, witnessed 51,974 informal sector workers enrolling into the CPS, contributing N42.1 million; under their watch, RSA registration grew to 9, 039,727 as at second quarter of 2020 growing pension assets to 11.08 trillion naira during the same period; and by ensuring that pension operators are managed by fit and proper persons, thereby ensuring that the industry continue to be insulated from fraud and maladministration thereby securing pension fund and assets.

ALSO READ: Pension Reform Act 2014: Compliance Issues With Regards To Employer

The appointment of Aisha Dahiru-Umar as the Director-General of PenCom pending Senate confirmation by the President is therefore a welcome development as it will ensure continuity, especially as the Chairman and the four commissioners are fresh hands.

The industry looks forward to Senate’s expeditious confirmation of the appointments that will bring a new lease of life in PenCom and the pension industry, which is emerging as the fasted growing sector in the country, creating jobs and value chains across the financial sector of the economy.

RELATED ARTICLES:

The Role of PENCOM in the Contributory Pension Scheme

Nigeria’s Contributory Pension Scheme

CDWR Accuses BUA Sugar Refinery of Violating Nigeria’s Pension Law

Ivor Takor mni, can be reached directly for comments and reactions via Email: [email protected]; WhatsApp: 234 803 786 1900. Comments and observations can also be made through the interactive platform at the bottom of this page.

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