Retirees are shifting from programmed withdrawal to annuities, prioritising the guaranteed lifetime payout they offer.
Retiree annuity hit a record high in uptake in the first quarter (Q1) 2025, surpassing programmed withdrawal for the first time since the Pension Reform of 2004.
The shift reflects that retirees are increasing prioritising long-term financial security through annuities, which align with rising life expectancy, according to industry experts.
The National Pension Commission (PenCom)’s Q1 2025 report of retirement options shows that annuity subscribers rose to 10,998 from 4,277 in first quarter of 2024, representing 157 percent increase over the period.
On the other hand, programmed withdrawal stood at 10, 812 from 6,164 in the same period in 2024, representing 75.4 percent rise over the period.
In Q1 2023, programmed withdrawal subscribers were 6,415 while annuity retirees were 3,505. In same period in 2020, while programmed withdrawal retirees stood at 8,425, annuity subscribers were 2, 523.
According to the commission, public sector retirees accounted for about 80 percent of the approvals, while the private sector had just over 20 percent.
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“Approved lump sum payments for annuity totalled N54.56 billion, and N111.01 billion was transferred from PFAs to life insurance companies for annuity premium purchases. Monthly annuity payments to these retirees amounted to N3.98 billion, highlighting the substantial and on-going financial commitments tied to annuity arrangements.”
On programmed withdrawal, the commission disclosed that in the same Q1 2025, a total of 10,812 retirees received approval to access their retirement benefits. The distribution of approvals continues to reflect the dominance of the public sector, with federal government retirees accounting for approximately 69 percent of the total, while state government subscribers constituted a smaller share. The private sector accounted for 3,035 approvals, representing 28.06 percent of the total, indicating a gradual yet sustained increase in private sector participation under the Contributory Pension Scheme (CPS).
“The cumulative lump sum disbursed to approved retirees under PW in Q1 2025 stood at N79.71 billion, with a corresponding monthly pension obligation of N2.04 billion. These figures underscore the ongoing financial responsibilities of PFAs in meeting retirement benefit commitments and highlight the critical importance of sustained investment performance to support consistent pension pay-outs across all sectors,” the commission said.
Babatunde Fajemirokun, managing director, AIICO Insurance Plc, explaining the increasing demand for annuity said, “Most retirees seek to maximise earnings and preserve purchasing power. Annuities are often preferred because they provide relatively higher payouts and allow retirees to benefit from the time value of money.”
On how the insurance industry has managed to sustain market confidence despite issues with African Alliance’s delayed payment to retirees, which ruffled the industry in most part of last year and early this year, he said:
“The challenges associated with African Alliance slowed market momentum somewhat. Our response was clear. The issue arose from weaknesses in the previous annuity asset management framework, which had limited investment oversight.
“Today, with the introduction of the Pension Fund Custodian structure, all annuity assets are securely held and professionally managed. These investments are highly regulated, supported by robust asset–liability matching systems, making a recurrence of the African Alliance episode impossible,” Fajemirokun said.
“The number of licensed insurance agents is far greater than the sales force within PFAs, allowing insurers to actively engage prospective retirees, often up to five years before retirement through pre-retirement seminars and personalised outreach. This peer-to-peer engagement creates trust and provides valuable opportunities to offer annuity solutions at the point of retirement.”
Tunde Mimiko, managing director, SanlamAllianz Life Insurance Nigeria Limited, said annuity price has been very competitive due to improved interest rates, buoyed by the microeconomic environment.
Jide Orimolade, managing director, StanbicIBTC Life Insurance Limited, said annuity is guaranteed for 10 years and above if annuitants survive. Orimolade noted that increased awareness around annuity by insurance companies, use of agents industry wide, and higher annuity pay-out, usually higher than programmed withdrawal, are supporting penchant for higher pension by retirees.
In Nigeria, life expectancy at birth (years) has improved by 9.34 years from 54.1years in 2000 to 63.4 years in 2021, according to latest data from the World Health Organisation (WHO).
The United Nations Population Division (UNPD) also reported that Nigeria has witnessed a modest growth in life expectancy over the past two decades.
In 2000, the total life expectancy stood at 47 years. The total life expectancy rose to 55 years in 2024, with women constantly maintaining a higher life expectancy than men, reaching 55 years, compared to 54 years for men, UNPD said.
This has driven a growing preference for retiree life annuities over programmed withdrawals under the Contributory Pension Scheme (CPS), as retirees seek guaranteed income for life rather than the risk of outliving their savings.
