FG’s N107bn offers lifeline for low-income retirees

The recent N107 billion paid into the Pension Protection Fund (PPF) by the federal government has provided a lifeline for retirees who would not have qualified for regular pay-outs due to poor savings or incomes.

The PPF was set up under the Pension Reform Act 2014 to provide financial support to pensioners with low balances in their Retirement Savings Accounts (RSAs).

The federal government recently paid N107 billion into the account after several years of waiting, providing support for low-income retirees.

Oguche Agudah, chief executive officer, Pension Fund Operators Association, said the payment is a good development for the pension industry.

According to him, it will enable those whose savings were not enough to procure either programmed withdrawal or annuity to have pensions in their retirement.

“It is a healthy development and will further strengthen the Contributory Pension scheme,” Oguche said.

Pius Apere, actuarial scientist and chartered insurer, said Nigerian pensioners have two basic expectations under the Contributory Pension Scheme (CPS), namely, to have sustainable standard of living in retirement and to receive their benefits as at when due.

Apere, who is also the chairman/CEO of Achor Actuarial Services Limited, said the above expectations cannot be fully met for all pensioners without the implementation of the Guaranteed Minimum Pension (GMP) as stated in Section 84(1) of Pension Reform Act (PRA) 2014.

The GMP is the minimum level of benefits accruing to a retiree.

“This is true, particularly for those retirees with small Retirement Savings Account (RSA) balances because they have not accumulated enough as at the date of retirement to have a decent standard of living in retirement.”

According to him, the delay in implementation of GMP by the regulator many years after the CPS was established in 2004 have resulted in a growing sense of disenchantment among current pensioners with relatively small RSA balances at retirement.

“This is because of the small monthly pensions they have been receiving over the years relative to the huge gains (from investment returns and/or dividends) the Pension Fund Administrators (PFAs) are currently making. The GMP, if implemented, would have eliminated the disenchantment among the current pensioners,” Apere said.

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Data from the National Pension Commission (PenCom) show that between 2020 and 2024, exactly five years, 171,229 retirees could not qualify for pension pay-outs in retirement due to low balances in their RSAs. They therefore collected a total of N45.51 billion en-bloc.

En-bloc is a pay-out to retirees whose consolidated RSA balance cannot procure monthly/quarterly pensions or annuities.

According to PenCom, Section 4.1 (g) of the Revised Regulation on the Administration of the Retirement and Terminal Benefits (the Regulation) provides that where the RSA balance cannot provide a monthly/quarterly pension or annuity of at least one-thirds of the prevailing minimum wage, the retiree shall be allowed to take the entire balance in the RSA en bloс.

With N70,000.00 as the current national minimum wage, PenCom explained that retirees whose monthly/quarterly pensions are less than N23,333.33, representing one-thirds of the current minimum wage of N70,000.00, would be allowed to choose between receiving the outstanding balance in their RSAs en bloc or continuing to receive their current monthly/quarterly pensions pending the commencement of the Minimum Pension Guarantee.

According to Joy Onwumere, a retiree knowledgeable on financial matters, the PPF is stepping in to provide crucial support for retirees at risk of losing their monthly or quarterly pension pay-outs.

She said while the new minimum wage will boost savings of those still working, it has further raised the bar for retirees that are almost hitting their retirement age.

“It has also worsened the growing financial divide, leaving many retirees struggling to maintain their standard of living in retirement. I hope the federal government will remember those of us that are already retired and buying in the same market with those on new minimum wage.”

Jerome Obah, a life annuity retiree, said inflation has eroded retirees’ pensions, forcing them to resort to living on the support of their children to survive.

The Centre for Pension Right Advocacy (CPRA) had earlier called on PenCom to put in place modalities for the full implementation of the Minimum Pension Guarantee in the Pension Enhancement Framework.

Ivor Takor, executive director of CPRA, had noted that the introduction of the Pension Framework by PenCom aimed at enhancing pensions of those who are on Programmed Withdrawal under the CPS might not meet the expectations of pensioners.