Revised pension regulation enhances earnings, access

The revised regulation on retirement and terminal benefits by the National Pension Commission (PenCom) has enhanced pension earnings and access for contributors and retirees in the Contributory Pension Scheme (CPS), as well as the Micro Pension Plan (MPP).

The regulation has taken into cognisance some of the complaints of Retirement Savings Account (RSA) holders concerning low monthly or quarterly payments, economic peculiarities of individuals and the need to bridge the gap between old pensioners and those in CPS.

Pius Apere, chairman/CEO of Achor Actuarial Services Limited, said the major challenges facing retirees under the CPS after about 18 years of its introduction include ensuring that they receive their benefits as and when due and having adequate retirement income to live a decent life at old age.

According to the actuarial scientist and chartered insurer, there is an urgent need to bridge the existing gap between the exponential growth in assets under management which led to huge dividend incomes being paid to shareholders of PFAs and the poor economic well-being of the generality of RSA holders.

A new provision on pension enhancement for retirees under the programed withdrawal (PW) mode was introduced in the revised regulation, which entrenches PenCom’s commitment to boosting the monthly pension of retirees.

The maiden pension enhancement was conducted in December 2017 sequel to an analysis of the balances in the RSAs of retirees receiving pensions under the PW mode.

It was discovered that the investment returns being generated by the PFAs on the balances of the RSAs of most retirees could be used to increase their monthly pensions.

The maiden pension enhancement resulted in increased monthly pensions for 64,076 retirees, while the second enhancement conducted in February 2020 resulted in enhanced pensions for 86,108 retirees.

The revised regulation has provided that there shall be a periodic pension enhancement for retirees on PW, based on the return of investment of funds in the RSA and the commission’s directive.

Pencom said, “Retirees with a minimum of 5 percent growth in their RSAs, from the date of initial programming or their last enhancement date, shall be entitled to receive enhanced pensions.

“PFAs have been mandated to review the retirees’ RSA balances at periodic intervals in order to determine eligibility for enhancement, as may be directed or specified by PenCom. A Pension Enhancement Template has been provided for the purpose of re-computation of the enhanced monthly or quarterly pensions to guide the PFAs accordingly.”

The revised regulation has a new provision on en-bloc payment to retirees with insufficient RSA balances, which would address some of the issues of low monthly pensions.

The provision allows the PFA to pay a retiree the entire sum En-bloc, where the RSA balance cannot provide a monthly/quarterly pension or annuity of at least one third of the prevailing minimum wage.

Prior to this provision, en-bloc payments were pegged at a specific monetary threshold.

“However, this has become inadequate due to varying economic realities. The new provision would address the dynamic economic circumstances as indicated by the National Minimum Wage,” the commission said.

The revised regulation has also addressed issues on the payment of benefits to MPP contributors.

PenCom said: “This is necessary due to the peculiarities of the MPP whereby contributions are segregated into contingent and fixed portions that are available for withdrawal and fixed for retirement, respectively.

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“It is noteworthy that the payment of the contingent and fixed portions of the contributions under the MPP shall be in line with the Guidelines on the Micro Pension Plan, issued by PenCom. However, for the purpose of accessing the fixed portion of the MPP contribution, the MPP contributor must not be less than 50 years of age. Furthermore, the provision on en-bloc payment as described above is also applicable to MPP contributors.”

The revised regulation provides that where an employee is missing, the employer or next of kin/legal beneficiary of the missing person shall notify the PFA of the disappearance after a minimum period of 12 months with proper identification.

It said: “Where the PFA is satisfied with the identity of the next of kin/legal beneficiary, then documentation and verification shall commence. Upon receipt of the Missing Person Notification Report and copies of the supporting documents, PenCom shall within 10 working days constitute a Board of Inquiry (BoI) with members drawn from the Commission, Police Criminal Investigation Department and other key stakeholders.

“If the BoI decides that the pension contributor is actually missing, then the process of benefits payment to the person’s next of kin/legal beneficiary will commence.”

To address the challenges faced by employees who wish to access their Nigeria Social Insurance Trust Fund (NSITF) contributions, the revised regulation established conditions applicable to retirees from the private sector with NSITF benefits, which NSITF transferred at the implementation of the CPS.

It provides that any employee who retires and has NSITF contributions shall notify the PFA of his/her intention to withdraw the NSITF contributions.

“A PFA shall request the retiree to provide necessary documents and application to access the NSITF part of the RSA balance. A PFA shall forward all requests to access the Pre-Act portion of the RSA balance to the commission for no-objection,” PenCom said.