As the Nigerian economy bites hard with increasing hardship following the impacts of COVID-19 pandemic, people are losing their jobs and increasingly tapping into their pension’s savings for survival.
From first quarter 2020 to first quarter 2021, about 48,873 Retirement Savings Account (RSA) holders have accessed N25.321 billion of their pension savings to survive.
These contributors after four months of losing their jobs and could not secure a new one, approached their respective Pension Fund Administrators (PFAs) to request for 25 percent of their RSA balance and were given approval by the National Pension Commission (PenCom).
Section 16(5) of the Pension Reform Act 2014 says 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 a 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 on its website.
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Joan Omoregbe, a former aviation sector worker who lost her job last year due to the COVID-19, says a lot of people will be out of job, with many companies being unable to pay salaries regularly.
According to Omoregbe, she has accessed 25 percent of her pensions to start a private business since no other job has come, thanks to her employer for remitting her pension contributions while she was working.
“With money from my pensions, I have gone into a wholesale dealership of beverages and provisions so that I can feed my family,” she states.
Oguche Aguda, CEO, Pension Fund Operators Association of Nigeria (PenOp), responding to question via Whatsapp message during the peak of COVID-19, said, “The pension industry will definitely be affected to the extent that some formal workers are losing their jobs or having their salaries slashed.”
Aguda however said in any case, the industry was engaging in a number of strategies to cushion the supposed effects on operators.
Figures released by PenCom reveal that in quarter one of 2020, the pension commission granted approval for the payment of N4.31 billion to 8,221 RSA holders under the age of 50 years, who were disengaged from work and unable to secure jobs within four months.
In 2020 quarter two, N2.56 billion was paid to 4,668 RSA holders; 2020 quarter three N8.10 billion was paid to 13,569 RSA holders; 2020 quarter-four N5.33 billion was paid to 11, 796, and in the first quarter of 2021, N5.021 billion was paid to 10,619 RSA holders.
While it is the right of the RSA holder to withdraw from his or her contributions in an event like this, it is important to know that this part withdrawal affects the overall savings for retirement, which of course is the key objective of the Contributory Pension Scheme (CPS).
The objectives of this scheme are 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.
In the case of the Private Sector, the scheme shall apply to employees who are in the employment of an organisation in which there are three or more employees.
Notwithstanding the provision of subsection (2) of this Section, employees of organisations 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 micro pension scheme.
