Low income earners whose input into the Contributory Pension Scheme (CPS) may not qualify them to purchase retirement benefit plans will soon be relieved, as the National Pension Commission (NPC) works to put in place guidelines on the Minimum Pension Guarantee Scheme, BusinessDay investigations reveal.
The guidelines when released, would stimulate the small to medium organisations which have not been part of the scheme due to their low-pay, and bring more stability to the nation’s flourishing pension system.
Analysts who spoke to BusinessDay, said it would be a healthy development for the pension industry, as it would provide more retirees in the low income bracket the opportunity to enjoy regular payments in retirement.
The Pension Reform Act 2014 provides that upon retirement, or on attaining 50 years of age, (whichever is later), the balance on the Retirement Savings Account (RSA) can be utilised for lump sum payment, provided the balance on the RSA afterwards is sufficient to procure a programmed withdrawal or annuity for life, in line with National Pension Commission’s (PenCom) guidelines.
Programmed monthly or quarterly withdrawal is a product of the Pension Fund Administrators (PFA), while Annuity for life is the product of life insurance companies.
Misbahu Yola, managing director/CEO, Legacy Pensions Limited, said that because some people’s pension contributions were small, or they had not been on the scheme for a long before they retired, they ended up with very little accumulated fund.
“What we have now is that, if your contribution is not more than N550, 000, you can’t buy a pension, as all your contribution is given to you when you retire,” he said.
Yola who is also the chairman, Pension Fund Operators Association of Nigeria (PenOp) observed that the Minimum Pension Guarantee Scheme which came in the 2014 Reform Act, would ensure that everyone got a pension payment on retirement, by adding some funds to low contributors’ funds, so that they could qualify to purchase programmed withdrawals or annuity plans.
“The law says it will be funded by government, PenCom and the operators. But the specific percentage contribution for PenCom and the operators hasn’t been worked out yet, but for government, it is one percent of the government wage bill. This will really be useful to people with small contributions,” Yola stated.
Section 84 (1) of the Pension Reform Act 2014 says that:“All retirement savings account holders who have contributed to a licensed PFA for a number of years to be specified by the Commission, shall be entitled to a guaranteed minimum pension as may be specified from time to time by the Commission”.
Aderonke Adedeji, managing director/CEO, Leadway Pensure Limited, explaining the benefits of this law, said its target was to ensure that objectives of establishing the scheme got to as many Nigerians as possible.
Adedeji said the objectives of the reform was to establish a uniform set of rules, regulations and standards for the administration and payment of retirement benefits to the public service of the Federation, the Public Service of the Federal Capital Territory, the Public Service of the State Government, the Public Service of the Local Government Councils and the private Sector.
It is also to ensure that every person who worked in the public service of the Federation, Federal Capital Territory, States and Local government or the Private Sector, received his or her retirement benefits as at when due.
It would also assist improvident individuals by ensuring that they saved in order to cater themselves during old age, she said.
The provisions of the Act should apply to any employment in the public service of the Federation, the Federal Capital Territory, the states, local governments and the private sector, the PFA boss noted.
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