Additional lump sum, easier access to RSA after job loss… PenCom revises regulation on retirement benefits

The National Pension Commission (PenCom) has reviewed its regulation on retirement and terminal benefits.

The regulation guides the process of accessing retirement and terminal benefits by pension contributors and retirees under the contributory pension scheme (CPS).

The agency said the revised regulation contains several new provisions on pension enhancement, voluntary contributions, temporary access to retirement savings account (RSA) due to loss of job, payment under the micro pension plan, and administrative sanctions for violations by pension fund administrators (PFAs), amongst others.

In a document shared on its Twitter account on Monday, PenCom said the implementation of the regulation is with immediate effect.

Here are some key highlights from the revised regulation:

SIMPLIFICATION OF DOCUMENTATION PROCESS

PenCom said the revised regulation has mandated PFAs to make efforts to ensure that all documentation preparatory to the retirement of the RSA holder should be provided and concluded within a period of four months prior to the date of retirement.

ACCESS TO RSA AFTER JOB LOSS MADE EASIER 

PenCom said the revised regulation has simplified the provisions on the notification and documentation required for access to RSA due to temporary loss of job.

Temporary loss of job has been defined as a situation “where an employee voluntarily retires, disengages or is disengaged before attaining the age of 50 years and is unable to secure another employment after four months of the disengagement.”

The provision addresses situations where employers refuse to confirm the retirement or disengagement of their former employees.

Prior to this revision, a letter of acceptance of resignation or disengagement issued by the employer is mandatory for a pension contributor seeking payment of 25 per cent for temporary loss of job.

However, the revised regulation provides that where the employer fails/refuses to accept the resignation letter from the employee, the PFA shall write the employer confirming the employee’s resignation and ensure that an acknowledgement copy is kept as proof of receipt.

Where the employer fails to respond to the PFA’s inquiry within 30 days, the employer’s refusal is taken as acceptance of the employee’s resignation for the purpose of benefits payable.

ADDITIONAL LUMP SUM PAYMENT

In terms of lump sum payment, the commission said the revised regulation has clarified that the retirees shall be allowed to access additional lump sum after the payment of the initial lump sum provided that there are additional inflows of funds into the RSA from the employers.

However, the additional remittances shall first be applied to augment the pension up to 50 per cent of the retiree’s final salary while the balance may be paid out as a lump sum.

Where the retiree’s pension is already up to 50 per cent of the final salary, the retiree may choose to collect the entire additional remittances as a lump sum.

Where the additional inflow into the RSA of a retiree-on-Retiree Life Annuity (RLA) is not up to N100,000, the amount shall be paid directly into the retiree’s bank account, subject to the commission’s approval.

RSA CONSOLIDATION BEFORE PAYMENT OF BENEFITS

According to PenCom, the revised regulation has also clarified that the RSA must be consolidated before retirement benefits can be accessed.

The new regulation mandates the PFA to take necessary steps to liaise with the employer and other relevant parties, to ensure that all the entitlements of a retiree or deceased person is credited to his/her RSA for the purpose of determining the final RSA balance, before processing of benefits.

ACCRUED PENSION BENEFITS FOR PRIVATE SECTOR CONTRIBUTORS

PenCom said the revised regulation has also made provision for the administration of pre- pension act benefits, which are the accrued pension benefits of contributors mainly in the private sector in line with the employer’s trust deed prior to the commencement of the CPS in June 2004.

Any employee who retires and has pre-act contributions shall notify the PFA of his/her intention to withdraw the pre-act balance.

A PFA shall request the retiree to provide necessary documents and an application to access the pre-act part of the RSA balance.

Consequently, the pre-act balance can be paid to the retiree separately, prior to selecting either programmed withdrawal or annuity modes of accessing retirement benefits.