Aisha Dahir-Umar: Why PenCom is simplifying access to retirement benefits

The National Pension Commission (PenCom) recently approved and issued a Revised Regulation on the Administration of Retirement and Terminal Benefits. Aisha Dahir-Umar, PenCom’s director-general, speaks on the reasons for the revision, the modifications and implementation by Pension Fund Administrators (PFA).

Some stakeholders in the pension industry have applauded the recently issued Revised Regulation on the Administration of Retirement and Terminal Benefits. What necessitated the revision of the regulation?

This is the maiden comprehensive review of the Regulation on the Administration of Retirement and Terminal Benefits since its initial issuance in 2007. The regulation guides the process of accessing retirement and terminal benefits by pension contributors and retirees under the contributory pension scheme (CPS). In line with its consultative approach, PenCom obtained input from key stakeholders in order to ensure a more efficient and responsive retirement benefit administration.

New provisions were made in the revised regulation to address new developments in the CPS in terms of administration of retirement and terminal benefits. What are some of these new provisions in the revised regulation?

One of the new provisions in the revised regulation is the simplification of notification and documentation required for access to RSA due to temporary loss of job. The provision has addressed 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 was mandatory for a pension contributor seeking payment of 25 percent for temporary loss of job. However, the revised regulation provides that where the employer fails or refuses to accept a resignation letter from an employee, the pension fund administrator (PFA) shall write the employer to confirm the employee’s resignation and ensure that an acknowledgement copy is received and kept as proof. Where an employer fails to respond to a PFA’s inquiry within 30 days, the employer’s refusal is taken as acceptance of the employee’s resignation for the purpose of benefits payment. 

Another significant provision in the Revised Regulation relates to the additional lump sum payment. The revised regulation has clarified that retirees shall be allowed to access additional lump sum after the payment of an 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 pension up to 50 percent of the retiree’s final salary while the balance may be paid out as lump sum. Where the retiree’s pension is already up to 50 percent of 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. 

The Revised Regulation also made new provisions to address issues on the payment of benefits to Micro Pension Plan (MPP) contributors. This became necessary due to the peculiarities of the MPP. Under the MPP, all contributions remitted are segregated into 40 percent for contingent withdrawal and 60 percent for pension accessible at retirement. The payment of the contingent and fixed portions of the contributions under the MPP shall be in line with the guidelines on the MPP, issued by PenCom. However, for the purpose of accessing the fixed portion of the MPP contribution, the MPP contributor must not be less than 50 years of age. Furthermore, the revised Regulation increased the payout limit for contributors with small RSA balances. In this regard, where the RSA balances cannot provide a monthly/quarterly pension or annuity of at least one third of the prevailing minimum wage, the retiree shall be allowed to take the entire balance in the RSA en-bloc. This is an increase in the amount to be disbursed as an en-bloc payment when compared to the N550,000 maximum limit allowable as an en-bloc in the past. 

Payment of benefits of missing persons is one of the new provisions in the Revised Regulation. The revised regulation provides that where an employee is missing, the employer or next of kin/legal beneficiary of the missing person shall notify the PFA of the disappearance after a minimum period of 12 months. Where the PFA is satisfied with the identity of the next of kin/legal beneficiary, documentation and verification shall commence. Upon receipt of the Missing Person Notification Report, PenCom shall within 10 working days constitute a Board of Inquiry (BoI) with members drawn from the Commission, the Police Criminal Investigation Department and other key stakeholders. If the BoI determines that the pension contributor is actually missing, then the process of benefits payment to the person’s Next of Kin/Legal Beneficiary shall commence. 

The revised regulation also made provision for the “reappearance” of “Deceased” RSA holders. It had been observed that some RSA holders who had been reported dead and all benefits paid to their Legal Beneficiaries, “reappear” after additional amounts are remitted into their RSAs. The Revised Regulation provides that where an RSA holder is reported dead, the PFA shall write to the bank of the deceased informing it of the demise and advise that the deceased’s bank account/BVN be flagged off. That would counter the actions of such fraudulent persons.

Furthermore, in order to address the challenges faced by employees who wish to access their Nigeria Social Insurance Trust Fund (NSITF) contributions, the revised regulation established conditions applicable to retirees from the private sector with NSITF benefits. It provides that any employee who retires and has NSITF contributions shall notify the PFA of his/her intention to withdraw the NSITF contributions. A PFA shall request the retiree to provide necessary documents and application to access the NSITF part of the RSA balance. A PFA shall forward all requests to access pre-Act portion of the RSA balance to the Commission for grant of a no-objection.

Over the years, retirees have clamored for an increase in their pension pay out. Has this Revised Regulation addressed this clamour?

A new provision on periodic Pension Enhancement for retirees under the programmed withdrawal (PW) mode was introduced in the Revised Regulation, which entrenches PenCom’s commitment to boosting the monthly pension of retirees. The maiden Pension Enhancement was conducted in December 2017, sequel to an analysis of the balances in the Retirement Savings Account (RSAs) of retirees receiving pensions under the PW mode. It was discovered that the investment returns being generated by the PFAs could be used to increase the retirees’ monthly pensions. The Revised Regulation provides that retirees with a minimum of 5 percent growth in their RSAs, from the date of initial programming or their last enhancement date, shall be entitled to receive enhanced pensions. PFAs have been mandated to review the retirees’ RSA balances at periodic intervals in order to determine eligibility for enhancement, as may be specified by PenCom. A Pension Enhancement template has been provided for the purpose of re-computation of the enhanced monthly or quarterly pensions to guide the PFAs accordingly.  

The revised regulation contains administrative sanctions against PFAs that flout the provisions of the regulation. How does PenCom monitor the PFAs to establish infractions for administrative sanctions to apply?

The commission monitors the PFAs activities through off-site supervision by reviewing the reports submitted periodically and conducts an on-site examination to physically review their records and to seek necessary explanations for any noted deviations. The administrative sanctions are aimed at ensuring that PFAs process all benefit payment requests expeditiously due to PenCom’s commitment to the well-being of retirees.

The revised regulation highlighted the different modes of pension payment. How should PFAs ensure that prospective retirees make informed decisions on the mode of accessing pension after retirement?

PFAs are required to properly enlighten a prospective retiree on the features of the two modes of receiving periodic retirement benefits i.e. programmed withdrawal (PW) and retiree life annuity (RLA). Secondly, every PFA shall make available a hard copy of the CPS retirement pack to prospective retirees, to enable them make informed decisions. The PFAs shall also advise prospective retirees to check their websites/PenCom website to further familiarise themselves with the CPS retirement pack. The Revised Regulation further provides that PFAs shall not compel the prospective retiree to choose either PW or RLA. PFAs are also required to advise a prospective retiree on how to complete the Standard Notice of Retirement Form. 

What should prospective retirees do to prepare for easy access to their retirement benefits? 

Prospective retirees of Federal Government treasury-funded ministries, departments and agencies (MDAs) that were in service prior to June 2004 are required to be recaptured on the enhanced contributors registration system (ECRS). The retiree should complete the Standard Notice of Retirement form to facilitate the processing of retirement benefits. Participation in the online verification and enrolment exercise is also required. Other notable processes include submission of all relevant documents to the PFA at least six months to retirement; execution of a PW Agreement with the PFA of choice. If it is the preferred mode of access or signing a provisional annuity agreement with a selected insurance company if retiree life annuity was chosen. Thereafter, the retiree shall endorse the consent form.