The national pension scheme was set up under the provisions of the Pension Reform Act 2004. The regulatory body is the National Pension Commission PENCOM.
What You Need To Know on the Pension in Nigeria
The national pension scheme was set up under the provisions of the Pension Reform Act 2004. The regulatory body for Pension in Nigeria is the National Pension Commission PENCOM. The other key organs of its operation are the Pension Fund Administrators (PFAs) and Pension Assets Custodians (PACs).
As an employee in the government or private sector, you need to have a pension fund administrator (PFA). They will best in the best position to answer all your questions and inform you so as to be able to make quality decisions regarding your retirement and life after work.
10 Things You Must Know About Pension in Nigeria
1. When is the Payment Date Due and How Do I Get Paid?
The payment of your pension in Nigeria can be monthly or quarterly. If you choose to be paid monthly, your PFA will pay your money to your bank account on or before the 24th day of every month. No need to worry about receiving cheques or any long process. Getting paid your pension will be completely convenient for you.
2. What If I Die?
If someone on the Contributory Pension Scheme (CPS) dies either in active service or after retirement, the next-of-kin as provided by the deceased to the PFA will be contacted to provide relevant documents for processing the contributions. The contributions will be paid to the beneficiary named within the WILL or the Letter of Administration.
3. Can I Replace My Next of Kin after I Retire?
Yes. You can do this anytime. The form for change of personal information ideally will be found on your PFA’s website. Download the form, fill it and submit to your PFA for appropriate updating.
4. How Much Can I Withdraw Once When I Retire?
As a retiree you are entitled to a lump sum between 25% and 50% of the total amount in your RSA account. This amount is however dependent on the fact that you the retiree are able to collect a monthly pensions not less than 50% of your last salary calculated based on the housing, basic and transport for a period of at least 18 years.
5. How Early Can I Start Getting My Pension in Nigeria after I Retire?
To withdraw your pensions in Nigeria, documentation is very important. The documentation process begins 6 months before your retirement.
Federal Government employees need to go for the Bond verification exercise organised by PENCOM. The reason for this is so that PENCOM consolidate their accounts and make sure that their accrued rights are paid as soon as they retire.
Private sector employees need to have their PFAs confirm that all contributions due to you have been made by your employer. This process is called ‘consolidation of account’. After this, the actual process of payment of pensions in Nigeria should take around 3 weeks.
6. Can I Choose How I want to be Paid Pension in Nigeria?
The programmed withdrawal means you get to choose your payment interval personally. You can choose to be paid your pension monthly or quarterly it depends on what you like and your PFA will credit your bank account based on the plan you choose.
7. Can I Withdraw from My RSA Before I Retire?
Yes, you can withdraw for your RSA before you retire. If you lose your job or are out of employment for 4 months and cannot get another employment, you will receive 25% of your RSA balance.
After this 25% has been withdrawn, the balance of your RSA cannot be touched again until retirement.
If on the other hand you prefer to make additional voluntary contributions (AVC) into your Retirement Savings Account (RSA), you are entitled to withdraw from your AVC any time before retirement as it is tax-free if don’t withdraw before 5 years.
So if you’ve been putting some AVC in your RSA or if you begin to do so now, you too can withdraw from that at any point before you retire.
8. What Happens to the Balance left after I withdraw My Lump Sum?
After retiring and withdrawing an initial lump sum from your RSA, there are two options:
- The remainder of the money can be used to procure an annuity for you
- The remainder of the money can be used to fund a programmed withdrawal that pays you for an estimated lifespan of not less than 18 years or as we say, for life.
A programmed withdrawal is a method by which the employee collects his retirement benefits in periodic sums spread throughout the length of an estimated life span.
An annuity is an income that is purchased from an approved Life Insurance company in Nigeria that pays you a monthly or quarterly income as a retiree during your lifetime but only the first 10 years are guaranteed. This means if the retiree dies AFTER 10 years, his/her beneficiaries get NOTHING.
9. Apart from When I Retire, Can I have Access to My RSA? When?
Yes you can. Here are the special cases when that is possible.
If you retire before 50 years old due to a mental or physical disability, your PFA will give you instant access to your RSA. In fact, you can claim 25% of your pension in Nigeria if in the case of a job loss and you can’t get a new job after 4 months.
10. Can I Move My Pension in Nigeria to an Insurance Company after I Retire?
Yes you can. It is totally your choice but we strongly advise that you keep your pensions with your PFA. This is because your PFA employs financial experts to manage your pensions while you work and they invest the pensions in Nigeria in safe portfolios that guaranteed Returns on Investment (ROI). They give you regular update about your money as you get ready for retirement.
You can trust your PFA to keep delivering even after you retire.
Another major reason to stay with your PFA is that once you move from Programmed Withdrawals to Annuity (with an insurance company), you CANNOT be re-instated again if you’re are dissatisfied with the services or offer you get.
Make a wise decision and contact a Pension Fund Administrator today. Your future and that of your loved ones depends on it.