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Pension Insight: CPS — how RSA holders accessed benefits in first half of 2024

August 1, 2024 5:08 pm

PenCom commences online enrolment exercise for prospective retirees The National Pension Commission (PenCom) says it has commenced the online verification and enrolment exercise for prospective retirees in ministries, departments and agencies (MDAs) of the federal government. The commission said the exercise is for those who are due to retire in 2025. Omolola Oloworaran, acting director-general (DG), PenCom, spoke at a workshop on the online enrolment application for pension desk officers (PDOs) of treasury-funded ministries, departments and agencies (MDA) of the federal government, on Monday in Abuja. Oloworaran said the commission is working effortlessly to ensure that challenges such as application downtimes are resolved. She also said a new and more efficient enrolment application that will provide a user-friendly and seamless experience for users has been developed. “At the National Pension Commission (PenCom), we hold firmly to our statutory responsibility of ensuring a seamless pre-retirement verification and enrolment process for employees of federal government treasury-funded MDAs,” Oloworaran said “Each year, we embark on this exercise to gather accurate data for determining the Accrued Pension Rights of prospective retirees, so that the federal government can make the necessary budgetary provisions. “Today’s session is not just a routine gathering; it is part of PenCom’s commitment to building the capacity of stakeholders, specifically you, the Pension Desk Officers, whose roles are indispensable in this process. “This workshop aims to equip you with the skills and knowledge needed to effectively use the application and address any challenges that arise during the enrolment process. “We are also here to confront the issues of the past head-on.” 'THERE WERE GAPS IN PREVIOUS ENROLMENT' She further said in previous enrolment exercises, gaps and challenges were observed. The PenCom DG added that the workshop will provide practical solutions and clarity on the modalities for the upcoming 2025 enrollment. “We understand that some challenges, like application downtimes, have occasionally hindered the process, particularly during last-minute rushes,” she said. “I am pleased to inform you that we are actively working on developing a new, more efficient enrolment application that will provide a user-friendly and seamless experience for all stakeholders." Oloworaran also reassured that the commission is committed to continuously improving service delivery across the pension industry. The PenCom boss said despite some setbacks, including delays in the release of funds for retirees’ accrued rights, she’s confident that these issues will soon be resolved. “Today is not just about resolving technical issues; it is also about reaffirming our shared responsibility to Nigeria’s retirees, who deserve timely and seamless access to their benefits,” she added. Oloworaran also said significant progress has been made by all critical stakeholders to clear the outstanding pension liabilities and put in place long-term solutions that will prevent future delays in funding.

Accessing retirement and terminal benefits within the contributory pension scheme (CPS) is seamlessly regulated by the National Pension Commission (PenCom). In line with the provisions of the Pension Reform Act 2014 (PRA 2014), PenCom has established procedures and requirements for retirement savings account (RSA) holders to access their retirement benefits as and when due.

Section 7(1) of the Pension Reform Act (PRA 2014) provides that retirement savings account (RSA) holders are entitled to access their benefits upon retirement or upon reaching the age of 50, whichever comes later. Contributors have the option to withdraw a lump sum from their total RSA balances, provided that the remaining balance is adequate to secure either a programmed withdrawal (PW) or a retiree life annuity (RLA) for lifetime pension benefits.

The PW offers a regular pension payment through a pension fund administrator (PFA), while the RLA, purchased from a life insurance company, provides a steady income for life.

Aside from retirement benefits, the CPS also offers various other forms of payments. These payments include provisions for temporary job loss, death benefits, en bloc payments, and equity contribution for residential mortgage, among others.

PROGRAMMED WITHDRAWAL

Programmed withdrawal is a benefit payment method by which the employee collects his retirement benefits in periodic sums (monthly or quarterly) spread throughout an estimated life span. From January to June 2024, PenCom has approved 13,581 requests from retirees to draw pension through PW mode. The retirees received a total lump sum of N74.88 billion, while their monthly pensions amounted to N871.02 million.

RETIREE LIFE ANNUITY

RLA, on the other hand, is a contract for regular income purchased from an approved life insurance company, which provides monthly or quarterly income to retirees during their lifetime. From January to June 2024, 9,560 retirees chose the annuity mode of pension payment. A lump sum of N35.21 billion was approved for payment to the retirees. N52.71 billion was paid to RLA providers to pay monthly pension of N885.22 million to the retirees.

EN-BLOC PAYMENT

The revised regulation for the administration of retirement and terminal benefits allows en-bloc payment to retirees whose RSA balances cannot procure programmed withdrawal or RLA that is equivalent to one-third of the prevailing national minimum wage. From January to June 2024, PenCom approved the en-bloc payment of retirement benefits to 7,167 retirees, totalling N4.85 billion.

DEATH BENEFITS

Death benefits are paid to a beneficiary under a will or the spouse and children of an RSA holder who dies in service. In the absence of a wife and child, the benefits are paid to the recorded next-of-kin or any person designated by the deceased. From January to June 2024, PenCom granted approvals for payment of death benefits amounting to N64.29 billion to the legal beneficiaries/administrator of 7,813 deceased employees and retirees.

TEMPORARY JOB LOSS

The PRA 2014 permits an employee who loses his job to withdraw an amount not exceeding 25 percent of the total amount credited to his RSA. However, such withdrawals can only be made after four months of cessation of employment, and the employee does not secure another job. From January to June 2024, PenCom approved N23.47 billion to 14,179 RSA holders under 50 years who were disengaged from employment and could not secure another job within the stipulated time of four months.

VOLUNTARY CONTRIBUTIONS

Section 4 (3) of the PRA 2014 allows RSA holders to make voluntary contributions (VC) in addition to the mandatory contributions to augment their pension at retirement. The VC can be withdrawn periodically based on the guidelines. From January to June 2024, PenCom approved withdrawals from voluntary contributions amounting to N7.33 billion by 2,099 contributors.

EQUITY CONTRIBUTION FOR RESIDENTIAL MORTGAGE

Eligible RSA holders have the opportunity to utilise their RSA balance to pay equity contributions for residential mortgages, in accordance with Section 89 (2) of the PRA 2014. This provision enables RSA holders to allocate a portion of their pension savings towards the equity component of a residential mortgage.

This initiative has proven instrumental in helping numerous individuals achieve their aspirations of homeownership since its inception. From January to June 2024, PenCom authorised disbursements totalling N28.52 billion to 3,539 RSA holders, facilitating their equity contributions for residential mortgages.

In conclusion, accessing retirement benefits under the CPS is seamless. PFAs must guide RSA holders who want to access their retirement benefits on the documentation requirements for each benefit payment type.