PenCom reviews retirement benefits
by Omobola Tolu-Kusimo
The National Pension Commission (PenCom) has unfolded a new retirement and terminal benefits for retirees, the outcome of its maiden review of the pension regulation since its inception in 2007, Omobola Tolu-Kusimo writes.
THE National Pension Commission (PenCom) has reviewed its retirement and terminal benefits.
It eliminates problems faced by retirees under the Contributory Pension Scheme (CPS) on pension enhancement, voluntary contributions, temporary access to Retirement Savings Account (RSA) due to loss of job, payment under the micro pension plan, administrative sanctions for violations by Pension Fund Administrators (PFAs), among others.
The regulation introduced some amendments and clarified others.
According to PenCom, the revised regulation entitled: “Revised regulation on retirement and terminal benefits Part I” is to be implemented by employers and pension managers.
The Director-General, PenCom, Mrs. Aisha Dahir-Umar, explained that the regulation guides the assessment of retirement and terminal benefits by contributors and retirees under the CPS.
She said the commission obtained input from key stakeholders to ensure a more efficient retirement benefit administration.
On the documentation of benefits, she explained that while the old regulation outlined documents for accessing benefits, the revised regulation has simplified the process.
Mrs. Dahir-Umar said the commission had mandated Pension Fund Administrators (PFAs) to ensure that the documentation was done for the retirement of RSA holders four months to their retirement.
To ensure that prospective retirees are educated on the modes of accessing their benefits, she said the PFAs had also been mandated to advise prospective retirees to check their websites and be acquainted with the CPS Retirement Pack for the Programmed Withdrawal (PW) and Retiree Life Annuity (RLA) at least three months to retirement.
She added that the pack also contains other issues for guiding workers prior to their retirement.
Addressing the non-confirmation of employment status by some employers, she said the revised regulation has clarified the provisions on the notification and documentation required for accessing the RSA due to temporary loss of job. She defined temporary loss of job as a situation where an employee retires, resigns or is kicked out before attaining 50 years but is unable to secure another employment four months after.
She said: “The provision addresses situations where employers refuse to confirm the retirement or disengagement of their former employees. Prior to this revision, a letter of acceptance of resignation or disengagement issued by the employer is mandatory for a pension contributor seeking payment of 25 per cent for temporary loss of job.
“However, The Revised Regulation provides that where the employer fails/refuses to accept the resignation letter from the employee, the PFA shall write the employer confirming the employee’s resignation and ensure that an acknowledgement copy is kept as proof of receipt. Where the employer fails to respond to the PFA’s inquiry within 30 days, the employer’s refusal is taken as acceptance of the employee’s resignation for benefits payment.”
On the additional lump sum payment, the PenCom chief stated that the revised regulation is clear. The retirees should be allowed to access the fund after paying an initial amount provided that there are more inflows of cash into the RSA from the employers.
“However, the additional remittances shall first be applied to augment pension up to 50 per cent of the retiree’s final salary while the balance may be paid out as lump sum. Where the retiree’s pension is already up to 50 percent of final salary, the retiree may choose to collect the entire additional remittances as lump sum. Where the additional inflow into the RSA of a retiree on Retiree Life Annuity (RLA) is not up to N100,000, the amount shall be paid into the retiree’s bank account, subject to the Commission’s approval.”
Addressing RSA consolidation before payment of benefits, she noted that the regulation had clarified that the RSA be consolidated before retirement benefits could be accessed.
“A retiree shall only be entitled to access his or her retirement benefits upon consolidation of his or her RSA.The components of an RSA at retirement shall consist of accrued pension rights or pre-act benefits (if any) for employees that were in employment before the commencement of the CPS, employer/employee pension contributions, returns on investment and fixed portion of voluntary contributions (if any).
“The new regulation mandates the PFA to liaise with the employer and other relevant parties to ensure that the entitlements of a retiree or deceased person are credited to his/her RSA to determine their benefits.”
On accrued pension benefits for private sector contributors, the PenCom boss said the regulation has unfolded the administration of Pre-Act Benefits, which are the accrued pension benefits of contributors mainly in the private sector in line with the employer’s trust deed prior to the commencement of the CPS in June 2004.
Thus, any employee who retires and has pre-Act contributions should notify the PFA of his/her intention to withdraw the Pre-Act balance.
She added that a PFA should request the retiree to provide documents and an application to access the Pre-Act part of the RSA balance.
Consequently, the Pre-Act balance can be paid to the retiree separately, prior to selecting either Programmed Withdrawal or Annuity modes of accessing retirement benefits, she said.
Credit: The Nation