|
Getting your Trinity Audio player ready...
|
We welcome the current move by the Senate to amend the existing Pension Reform Act (PRA) to increase the lump sum paid by pension fund managers to retirees from 50 to 75 percent.
Undoubtedly, the existing legislation which allows pensioners’ access to only a maximum of half of their life savings is anachronistic and out of tune with current realities in the country.
Matters have been rendered worse by the absence of other social security benefits in Nigeria. Thus necessitating the need for the clamour by retirees to access substantial amounts as a lump sum from their RSA balance.
As if that is not enough, operators of pension funds in the country have capitalized on this loophole to milk the nation dry in the name of funds management.
As an agency of government charged with the responsibility of managing retirees’ benefits, it should not really be her concern as to how a retiree wishes to spend his or her pension
On this note, we agree with the National Pension Commission (Pencom) on the need for government to institute zero pillar pensions in the form of a social security benefit, which is recognised and provided for under Section 16(2)(d) of the Constitution of the Federal Republic of Nigeria 1999 (as amended) which if implemented, will go a long way to alleviate the sufferings of all Nigerians irrespective of whether or not they were engaged in formal employment. It will equally augment earnings from occupational pensions.
However, we find it curious, the objection by the Pencom management to an increase from 50% to 75% of what retirees could withdraw from their legitimate funds.
In a memorandum sent to the Senate Committee on Establishment and Public Service recently, the Commission stated that “rather than canvass for payment of 75 percent lump sum, we believe that the remedy lies in the implementation of the provision of Section 4(4)(a) of the PRA, 2014 dealing with payment of additional benefits upon retirement. It provides that ‘notwithstanding any of the provisions of this Act, an employer may elect to agree on payment of additional benefits to the employee upon retirement’. This would enhance the amount that employees may receive as a lump sum upon their retirement,” the commission stated.
The Commission further said, “experience has shown that about 99 percent of retirees who collected huge lump sums from their RSAs squandered the money quickly after retirement and were left with meager amounts as pensions”.
“We, therefore, believe that it is not in the overall interest of the retiree to saddle him with the responsibility of managing 75 percent of his total benefits after retirement when he should have been resting and enjoying the fruits of his long years of labour”.
Read also: Pencom seeks review of 2014 pension reforms Act
As an agency of government charged with the responsibility of managing retirees’ benefits, it should not really be her concern as to how a retiree wishes to spend his or her pension. We do not see anything wrong with a pensioner having the liberty to withdraw even his/her whole sum if the person wishes or alternatively advising his/her pension administrator the kind of investments he/she wants to put the funds into.
It is amazing that after spending 60 years or 35 years of active service to one’s fatherland, Pencom and PFAs still regard the pensioner as a novice; meaning that he/she does not know how to handle his/her hard-earned entitlements.
A simple illustration will suffice. Mr. ‘X’ retires at 60 years and has N20million as his savings. He accesses 50% of N20m which equals N10millon. The balance of N10m is to be spread over 180 months (15years) for which he earns N55,555 monthly for 15years and he stops earning anything because he is expected to die at 75. If Mr. ‘X’ will be allowed to have his total sum of N20m, ceteris paribus (all things being equal), he could invest in the Money Market or Government Treasure Bills which currently can fetch him up to a maximum of 15%p.a on a span of four consecutive 90 days tenor.
Meaning N20m gives about N3m per annum. Divide N3m by 365 days and multiply by 30 days Mr. ’X’ will monthly earn about N246,575 without depleting his N20m capital.
Therefore, it goes to say that the sum given to an average pensioner is not up to the interest the administrators make on his/her savings. Little wonder pension funds have become the most lucrative business in Nigeria. These and other abnormalities constitute what the new Pension Reform Act intends to correct.
Hence, it is our expectation that all forms of manipulations in the name of pension funds administration would come to an end when the new legislation comes into force. We believe this is the way to go. To give our retirees freer access to their hard-earned money.
