Job losses spark rise in Pension Funds redemption requests

Raging job losses across different sectors of the economy including oil and gas, manufacturing is putting pressure on the nation’s pension funds as demands for part redemptions rise, BusinessDay investigations reveal.

This pressure is coming from increasing demand on Pension Fund Administrators (PFAs) to pay 25 percent part contribution to those who lost their jobs as permitted in the Pension Reform Act of 2014.

The implication of this is that PFAs are using part of their investible funds to pay disengaged workers who could not secure jobs after a while and need some money to continue funding their living expenses.

Usman Suleiman, managing director, FUG Pensions Limited, who confirmed development said the current rise in job lose has serious implication on PFA businesses.

“Firstly, it would have impacted on our investible fund when a lot of people are coming to access 25 percent of the funds in their RSA, and secondly, is that the number of enrolment would be affected if unemployment rate is high,” said Suleiman.

Section 16(1) of the Pension Reform Act 2016 says that an employee shall not be entitled to make any withdrawal from his retirement savings account opened under section 11(1) of this section before attaining the age of 50 years.

While 16(5) says notwithstanding the above, any employee who disengages or is disengaged from employment before the age of 50 years and is unable to secure another employment within four months of such disengagement may make withdrawal from his retirement savings account in accordance with the provision of section 7(2) and 3 of this Act.

“Where a Retirement Savings Account (RSA) holder is temporarily unemployed before the retirement age (i.e. he/she is voluntarily/involuntarily disengaged, downsized, retrenched etc.) and has remained unemployed for a period of at least four (4) months without securing another employment, such an individual may apply for 25 percent of his/her current RSA balance,” one of the PFAs explained in its website.

Misbahu Yola, managing director, Legacy Pension Limited said during an interview : “That people who lose their job will come for part of their savings to survive is given. It is part of the pension Act and when they apply to take their money we will pay them.”

According to Yola, the development will have an impact on the pension industry, particularly if they are many people being laid off and could not secure another job after some time.

Over the last three months, no fewer 10,000 workers have been sacked from their employment, including last week when Diamond bank sacked over 400 workers, Ecobank 1,040 workers and the parent company of First Bank, FBN Holdings revealed plans to cut down its workforce by 1,000 staff.

Before now leading manufacturing companies including Nigerian Flour Mills, NFM, Nigerian Breweries Limited, NBL, Guinness Plc, Nigerian Bottling Company, NBC, 7 UP Bottling Company Plc, Friesland Campina Wamco Plc, among others, were said to have written to labour unions for discussions on retrenchment of workers.

About 2, 500 workers have been sacked in the manufacturing sector as employers seek ways of coping with foreign exchange crisis, among others.

Nigeria unemployment rate was recorded at 12.1 percent in the First quarter of 2016, up from 10.4 percent in the fourth quarter of 2015, reaching the highest since December of 2009. The number of unemployed persons rose by 18 percent to 9.485 million, employment grew a meager 0.12 percent to 69 million and labour force went up 2 percent to 78.4 million. Meanwhile, youth unemployment increased to 21.5 percent from 19 percent.

According to the National Bureau of Statistics, NBS, unemployment is the proportion of those in the labour force (not in the entire economic active population, nor the entire Nigerian population) who were actively looking for work but could not find work for at least 20 hours during the reference period, to the total current active labour force population.

MODESTUS ANAESORONYE