Poor remittances, stringent guidelines and salary delays are dealing blows on pensioners, preventing them from making additional savings on retirement.
Pensioners are willing to have enough resources that would enable them to go for holidays, travel and even enjoy some moments with families and relatives from additional voluntary contributions, but their dreams are often terminated by poor remittances and salary delays.
Many are frustrated as they cannot take advantage of the Additional Voluntary Contributions (AVS) provided under the Contributory Pension Scheme (CPS).
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The AVC pension allows a pensioner to make extra contributions to their retirement savings, beyond the regular contributions already made through the workplace pension scheme. These additional contributions are usually deducted from salaries or other income sources and can be a tax-efficient way to boost your retirement income.
For Godswill Ajaegbu, an estate surveyor working with a real estate firm in Lagos, the guidelines for making extra contributions through the AVC is stringent.
He said that employers are not often remitting monthly contributions, preventing workers from being part of the AVC.
“My employer does not remit my pension contributions regularly. How then do I go and tell my human resources manager to make additional contributions on my behalf” he asked.
Ajaegbu said, “I make extra income from my hustles, but I cannot save extra in my Retirement Savings Account (RSA). So, for me, this is not good.”
He said the AVC guideline should be softened to allow individuals to save money from their side hustles, or allow people who may have opened RSA accounts under the CPS to join micro pension plans to enable them to save even from hustles.
Data from the National Pension Commission (PenCom) show that a total of 54, 053 RSA holders have subscribed to AVC, contributing a total of N54.98 billion from inception in the fourth quarter (Q4) of 2023 to end of third quarter (Q3) of 2024.
The AVC is an essential strategy for achieving long-term security, according to experts at Leadway Pensure Limited, a pension fund administrator in Nigeria.
Speaking on the importance of financial stability in retirement, Peter Mould, head of business development and partnerships, Leadway Pensure, emphasised the advantages of AVC as an essential strategy for achieving long-term security.
He stated, “Retirement planning goes beyond setting aside a portion of your paycheck. It involves creating a well-structured strategy that ensures financial stability and peace of mind in your golden years.”
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He said the AVC allows individuals to contribute extra funds to their Retirement Savings Account (RSA), helping them build a stronger financial future.
He further highlighted that the AVC is accessible to everyone, regardless of income level. “AVC is not just for high-income earners, it is for anyone who wants to take control of their financial future
“Whether you’re a young professional just starting out or a business owner planning ahead, AVC can help you reach your retirement goals faster.”
Gloria Daniels, head of Customer Relationship Management also of Leadway Pensure, provided a step-by-step guide on initiating the AVC, emphasising the flexibility and ease of the process.
She explained: “Starting your voluntary contributions is simple. You can either increase your monthly contributions or make lump-sum payments. The key is to take the first step and commit to securing a better future for yourself.”
She encouraged employers and HR professionals to actively promote the AVC among their employees.
“Business owners and HR professionals play a critical role in fostering financial security among employees. By educating their workforce about the benefits of AVC, they have not only helped employees secure their future but also encourage a culture of financial responsibility,” she added.
Meanwhile, experts at Crusader Sterling Pension also described the AVC as contributions made by RSA holders in addition to the mandatory contributions within the contributory scheme.
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“It is a strategic way to enhance your pension savings beyond the mandatory contributions.”
It also serves as a tailored savings avenue, allowing anybody to achieve specific financial goals towards retirement, the PFA stated.
“These contributions are tax-exempt, meaning they are deducted from your income before taxes are levied, resulting in reduced tax obligations.”
