How, When To Take From Your Retirement Savings

(Sundiata Post) – The objective of the Contributory Pension Scheme (CPS) is met when an employee on attaining the retirement age is able to access his pensions as and when due, as provided in the Pension Reform Act. This does not only give rest of mind to the retiree but also creates an atmosphere of healthy and strong social economic society.

When the Pension Reform Act was conceptualized, one of the key goals is to achieve a system of pension management where the burden of payment is strategically taken away from government,and at the same time have retirees that will not depend on their immediate families for survival oron the society as a whole. That means, a retiree covered by this scheme would have contributed to the success of his retirement by making his own contribution with his employer as well as through Additional Voluntary Contribution(AVC).

Experts at Leadway Pensure in looking at retirement tips in the CPS, has provided grounds and insights on how and when an employee accesses his or her pension contributions. Leadway Pensure says that an employee may access his/ her RSA when he/she ceases to make further contributions into the RSA as a result of mandatory retirement, compulsory retirement, retirement on medical grounds, and death. Mandatory Retirement: This ground for withdrawal is specifically for employees who disengage from employment upon attaining the official age of retirement either on the terms of his/her employment or age 50, whichever comes later. Retirees in this category are entitled to the balance in his/her RSA. This could be received as Enbloc payment, where the balance in the retirees’ account is N550, 000.00 or less, or as lump sum and Programmed Withdrawal or Annuity.

Temporary Retirement: This is when an employee who registered under the scheme voluntarily retires or is disengaged from active service before the attainment of age 50. This category of Retirement Savings Account holders can only access up to 25 per cent of the balance in their RSA 4 months after disengagement provided the RSA holders do not secure another employment; the remaining balance can only be accessed after the customer attains 50 years of age through a lump sum and Programmed Withdrawal or Annuity. It is important to state that 25 per cent of the RSA balance can only be accessed once.

Medical Grounds: This is when an employee disengages from active service based on the advice of a suitably qualified physician or medical board certifying that the employee is not mentally or physically capable of working either due to permanent disability of the body or of the mind. Employees in this category will access their funds on same grounds as mandatory retirement, i .e Enbloc or Lump sum and Programmed Withdrawal/ Annuity.

Death Benefits: If a Retirement Savings Account holder is deceased, the beneficiary or any other person directed by a court of competent jurisdiction will be entitled to the customer’s RSA balance upon submission of a WILL admitted to Probate or Letter of Administration where the customer died intestate.

Foreigner: An expatriate (non- Nigerian National) can access the balance standing in the Retirement Savings Account (RSA) when relocating to his/her country. An RSA holder shall, within six (6) months to his/her mandatory or compulsory retirement, notify the PFA of the impending retirement. The retirement benefit is categorized in accordance with the customers’ respective sector of employment i.e. Public or Private sector. In addition, retirees from State Public Services shall be guided by any other specific requirement of the law enacting their individual state pension schemes. In line with the National Pension Commission’s regulations on retirement benefit payments, a retiree is entitled to a lumpsum (optional) and the remaining balance can be accessed in two ways based on choice of the retiree. These are Programmed Withdrawal or Annuity:

Programmed Withdrawal: This is a method by which a retiree collects his / her pension in periodic sums spread throughout the length of an estimated life span. The periodic payment can be monthly or quarterly and in the event of his/ her untimely death, the balance in the RSA is paid to the retiree’s beneficiaries. Also, where there is a delay in payment, the arrears of monthly payment will be paid to the retiree together with the lump sum, once approval is received from PenCom.

Annuity: This is a regular pension payment made to a retiree (called an Annuitant) for the rest of his/her life. It can be paid monthly or quarterly as long as the retiree lives. An Annuity is initially payable for ten (10) years (which is the guaranteed period) and thereafter until the death of the Annuitant. In the event of the Annuitant’s untimely death after the guaranteed period, the payments will cease. If the Annuitant passes on before the expiration of the guaranteed period, the insurance company will pay for the period left to the end of the guaranteed period. The objectives of this scheme is to ensure that every person who worked in either the public Service of the Federation, Federal Capital Territory, States and Local government or the Private Sector receives his retirement benefits as and when due ; and to assist improvident individuals by ensuring that they save in order to cater for their livelihood during old age. The provisions of this Act shall apply to any employment in the public service of the Federation, the public Service of the Federal Capital Territory, the Public Service of the state, the public service of the local governments and the private sector. In the case of the Private Sector, the Scheme shall apply to employees who are in the employment of an organization in which there are 3 or more employees. Notwithstanding the provision of subsection (2) of this section, employee of organization with less than three employees as well as self-employed persons shall be entitled to participate under the scheme in accordance with guidelines issued by the commission.

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