Highlighting Ways To Accessing Pension Funds, Benefits

Leadway Assurance Company Limited recently organized a virtual training for members of the National Association of Insurance and Pension Correspondents (NAIPCO) and one of the topics treated during the training by one of the facilitators Mosumola Moyo Balogun of Leadway Pensure was “How to Access Pension Funds and benefits.”  where she focused mostly on Withdrawal Options & Requirements; Understanding Benefits Types and Documentation Requirements. Excerpts By EDET UDOH.

There are various categories of withdrawal options including health grounds, loss of job, early retirement, and mandatory retirement.

Health Ground 

This refers to disengagement from active service on health grounds based on the advice of a qualified physician or medical board. As the name projects, Pension Act allows individuals that are unable to work and they exit the employment due to ill health. What this does is that irrespective of the age of the Retirement Saving Account holder, he or she can actually have access to withdraw 25 per cent from his or her pension contributions. Once some exit his or her employment on health grounds, the Act allows such individual to access 25 per cent of his contributions.

Loss of Job

This category allows individual that is yet to clock the stipulated retirement age which is 50 years in Nigeria and so for instance, we have just fall out of jobs due to some certain reason, may be due to terms and condition of the employment, people that voluntarily leave their employments but yet to clock 50 years, irrespective of how you leave the employment, as long as you are under 50, what the Pension Reform Act says is that such individual can approach his or her Pension Fund Administrator (PFA) and put in an application to have access to 25 per cent to his or her total contributions so far inclusive of the interest.

Early Retirement

This occurs when an employee voluntarily retires, disengages or is disengaged from active service before attaining the age of 50 or upon completion of the length of service as stated in the terms and conditions of his/her employment.

Now, most people and most organizations in Nigeria have what is called terms and conditions of employment. For instance in Leadway, you can work until when you are 60 or 65, and if you are leaving employment earlier than that age, it means that your position is early retirement.

In Leadway, we have so many people that wish to leave employment at 45, we have people that say they want to work until they are 50, we have people leaving employment at 35 years and so we call that early retirement. If you retire earlier than what the terms and conditions of employment says, you can also access your pension contributions.

Mandatory Retirement

This category of retirement says that if you are retiring mandatorily, it means that according to the terms and conditions of the employment, you cannot continue to work when you clock a certain age.  This refers to disengagement from employment upon attaining the age of 50 or retirement, whichever is later. This differs according to organizations and industries: For private sector, it may be 60 and for some it may be 65. However, what Pension Reform Act says is that once you clock 50 years, you become pensionable, so irrespective of what is stipulated as retirement age in the terms and conditions of the employment, once you attend the age of 50, you can decide to exit or wait to retire mandatorily, whatever works for you is fine.

Understanding Pension Benefits

For withdrawal Options, we have the enbloc payment, we have the 25 per cent, we have programmed withdrawal and annuity purchase as well.

Enbloc Payment

Where an RSA Holder disengages or retires from active service upon attaining the fifty (50) years of age and his/her RSA balance is less than N550,000.00, the employee would be paid the total balance in his/her RSA as an enbloc payment (single payment).

25% Payment for Temporary Loss of Job

It is the payment made to an RSA holder that retires before his or her retirement age of 50.  Where an employee voluntarily retires, disengages or is disengaged from active service before attaining the age of 50, he/she can access 25% of the balance in their RSA  within four months after disengagement (if no other employment is secured) while the balance can only be accessed after the RSA Holder attains 50 years of age. If your age is less than 50 and you find yourself out of job be it voluntarily or compulsorily, you can have access to 25 per cent of what you contributed to your RSA providing that you have been out of job for four months.

For instance, if somebody gets out of employment in December, it means that before the person can have access to 25 per cent of his or her contributions, he or she need to wait till April ending before he or she can approach his or her PFA to access 25 per cent of what is in his or her account. Prior to now, it used to be a six months waiting period, but it was shortened to four months and also an individual can only have access to 25 per cent payment once and thereafter till he or she clocks 50. What this basically means is that for these individual that loss his or her job and access 25 per cent, he or she can no longer withdraw anything from his or her pension account until he or she clocks 50 or if the individual gain employment again, he or she can resume contribution again, whatever the situation may be, he or she can only have access to pension contributions once.

Retirement Benefit

It is a payment that is being made to an RSA holder who retired from active employment upon attaining the age of 50 years old. It can be lump sum or programmed withdrawal payment. Once he or she clocks 50 whether he or she retires mandatorily or voluntarily and he or she wants to have access to pension funds. This means that you are no longer in employment, and you want to have full access to your pension. In having full access to your pension, there are two options: you can decide to go for lump sum payment and periodic payment. In having periodic payment, there are two options and the periodic payment is being offered by the pension aspect or insurance or assurance, the individual may decide that he or she wants to get a lump sum or to transfer his or her funds to insurance or Assurance Company so that they can pay him or her pensions under their annuity mode of payment, individual can decide to get his or her lump sum and leave pension contributions in his or her RSA so that he or she can also be paid pension or whichever is fine for the retiree.

We are advocating for retirees to go for either annuity or monthly pension under programmed withdrawal, you can maintain your RSA with your choice PFA.

Lump Sum and Programmed Withdrawal Payment

Where a RSA Holder disengages or retires from active service upon attaining the fifty (50) years of age and his/her RSA balance is more than N550,000.00, he/she will be eligible to make a lump sum withdrawal provided that the amount left in the RSA after the lump sum withdrawal is sufficient to fund programmed withdrawals or purchase an annuity (from an Insurance Company, licensed and approved by NAICOM) which will ensure that the amount received as pension periodically is not less than 50% of the RSA holder’s total annual remuneration at the date of his retirement.

For other retirement benefits depending on the retiree’s RSA account, the retiree can either decide to withdraw everything especially when the RSA holders contributions is less than N550,000 and that is because what the retiree has in his or her account is not sufficient to pay him or her a lump sum and place him or her on monthly pension so what the regulation says in this case is that if he or she clocks 50 or retire and such individual is no longer working and  want to access pension fund, if what he or she  has in  RSA is N550,000 and below, then the PFA in this regard is expected to pay the retiree everything in his or her account. It is called insufficient balance.

Health ground benefits

It is the payment paid to an RSA holder who retired or disengaged from active employment due to ill health or temporary disability. Sometimes they are people who leave employment due to temporary disability and have accessed their funds and if such individual gets back and is fit and able to work again, he or she can go back to employment, resume contribution and continue life as usual.

RSA Holder in this category can access the balance in his or her RSA either through an Enbloc payment (if the RSA balance is less than N550,000.00) or through a Lump sum and Programmed withdrawal/Annuity payment.

Pension Contribution

Under the Contributory Pension Scheme (CPS) according to Nigeria Pension Commission, employee is expected to contribute 8% of the sum of his basic salary, housing allowance, and transport allowance. The employer however is required to contribute minimum of 10% of the same sum.

Additional Voluntary Pension Contribution (AVA)

A part of the reforms that have taken place in the Nigerian Pension Scheme is the introduction of voluntary contributions. By that introduction, the Pension Reform Act (PRA) 2014 allows employees to make voluntary contributions into their Retirement Savings Accounts in addition to their mandatory pension contributions. This helps contributors to build up extra benefits for retirement.

Voluntary Contribution Withdrawal

This is a payment made to an RSA holder who made additional voluntary contributions into his/her Account. 50% of the additional voluntary contributions that have been retained in their RSAs for a minimum period of 2 years can be accessed. Retired RSA holders currently receiving monthly pensions on Programmed withdrawal or Annuity can access all voluntary contributions after the expiration of their contracts.

A Retirement Savings Account holder with Voluntary Contributions (VC) may also choose to make withdrawals from his/her Voluntary Contributions at any time. The income earned on the VC will however be subject to tax at the point of withdrawal, where the withdrawal is made before the end of 5 years from the date the voluntary contribution is made.

Activating NSITF Benefit

Benefit payment type for RSA holders who had contributions with the defunct National Social Insurance Trust Fund (NSITF). Retrieved funds are consolidated with RSA balance of active employees’ and accessed at retirement, Retirees on Programmed Withdrawal or Annuity will access the proceeds as additional payment in line with extant guidelines issued by the National Pension Commission (PenCom). Regulation allows contributors to have access to their additional voluntary contributions within a period of two years.

Documentation Requirement

Accessing pension funds is as easy as ABC. All benefits processing have similarities in documentation except for death benefit.  The documentation requirement include Exit Letter; Letter of First Appointment; Confirmation of Accrued Right Letter form Last Employer; Birth Certificate; Passport Photograph; Valid Identification Card; Bank Details and NIN registration Slip

It should be noted that other documents may be required depending on peculiarity of the client involved; Change of name document e.g., marriage certificate or news paper publication may be needed where applicable.