Revised regulations on retirement and end-of-career benefits by the National Pensions Commission (PenCom) have improved retirement income and the access of contributors and retirees to the Contributory Pension Scheme (CPS), as well as to the micro-retirement scheme (MPP).
The regulations have taken into account some of the grievances of holders of the Retirement Savings Account (RSA) concerning the low monthly or quarterly payments, the economic specificities of individuals and the need to bridge the gap between former retirees and those on CPS.
Pius Apere, chairman and chief executive of Achor Actuarial Services Limited, said the main challenges facing pensioners under the CPS after some 18 years of its introduction are ensuring they receive their benefits at the mature and have adequate retirement income to live a decent life in old age.
According to the scientific actuary and chartered insurer, there is an urgent need to close the gap between the exponential growth of assets under management which has led to huge dividend income paid to PFA shareholders and the poor economic well-being of the of RSA Holders.
A new pension enhancement provision for retirees under the Scheduled Withdrawal (PW) mode has been introduced in the revised regulations, which enshrines PenCom’s commitment to increase the monthly retiree pension.
The first pension enhancement was carried out in December 2017 following an analysis of the RSA balances of retirees receiving pensions in PW mode.
It was found that the investment returns generated by ATP on the RSA balances of most retirees could be used to increase their monthly pensions.
The first pension improvement resulted in increased monthly pensions for 64,076 pensioners, while the second improvement carried out in February 2020 resulted in increased pensions for 86,108 pensioners.
The revised regulations provided that there will be a periodic pension bonus for PW retirees, based on the return of the funds’ investment in the RSA and the directive of the commission.
Pencom said: “Retirees with a minimum growth of 5% in their RSAs, from their original programming date or their last enhancement date, will be eligible to receive enhanced pensions.
“The PFAs have been mandated to review retiree RSA balances at periodic intervals to determine eligibility for enhancement, as directed or specified by PenCom. A pension enhancement model has been provided for recalculation of enhanced monthly or quarterly pensions to guide PFAs accordingly.
The revised regulations contain a new block payment provision to retirees with insufficient RSA balances, which would address some of the problems associated with low monthly pensions.
The provision allows the PFA to pay a pensioner the full lump sum, where the balance of the RSA cannot provide a monthly/quarterly pension or annuity of at least one-third of the prevailing minimum wage.
Prior to this provision, bulk payments were pegged to a specific monetary threshold.
“However, this has become insufficient due to varying economic realities. The new provision would respond to dynamic economic circumstances as indicated by the national minimum wage,” the commission said.
The revised regulations also addressed issues relating to the payment of benefits to MPP contributors.
PenCom said: “This is necessary due to the peculiarities of the MPP whereby contributions are separated into conditional and fixed portions which are available for withdrawal and fixed for retirement, respectively.
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“It should be noted that payment of the conditional and fixed portions of MPP contributions must be in accordance with the Micro Pension Plan Guidelines, published by PenCom. However, in order to access the fixed part of the MPP contribution, the MPP contributor must not be less than 50 years old. In addition, the bulk payment provision as described above also applies to MPP contributors.
The revised regulations provide that in the event of the disappearance of an employee, the employer or the next of kin/beneficiary of the disappeared person must notify the disappearance to the PFA after a minimum period of 12 months with an identity document appropriate.
He said: “Once the PFA is satisfied with the identity of the next of kin/legal beneficiary, documentation and verification should begin. Upon receipt of the missing person notification report and copies of supporting documents, PenCom shall, within 10 working days, appoint a Board of Inquiry (BoI) consisting of members drawn from the Commission, the Criminal Investigation Department of the Police and other key stakeholders.
“If the BoI decides that the pension contributor is indeed absent, the process of paying benefits to the person’s next of kin/legal beneficiary will begin.”
To address the challenges faced by employees who wish to access their Nigeria Social Insurance Trust Fund (NSITF) contributions, the revised regulations set conditions applicable to private sector retirees receiving NSITF benefits, which the NSITF transferred during of the implementation of the MSC.
It provides that any retiring employee who has contributed to the NSITF must notify the PFA of their intention to withdraw the NSITF contributions.
“A PFA will ask the retiree to provide the necessary documents and application to access the NSITF portion of the RSA balance. A PFA will forward all requests for access to the pre-deed portion of the RSA balance to the commission for no objection said PenCom.