Loss of job: Why you should not withdraw your pension savings

Employees under the Contributory Pension Scheme (CPS) who lose their job have right to access from their Retirement Savings Account (RSA) balance some amount of money for survival.

The Pension Reform Act 2014 allowed this leeway for those who have not reached the retirement age of 50 or 60 as the case may be, but lost their job and could not secure another job after four months, and need part of their pension savings to survive.

While the law permits withdrawal of maximum 25 percent of the RSA balance, experts and managers of the fund encourage those who can avoid the withdrawal to avoid it, as it has some negative impacts on what becomes of the RSA balance at the point of retirement.

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According to the Act, “Where an employee voluntarily retires, disengages or is disengaged from employment as provided for under Section 16(2) and (5) of this Act, the employee may with approval of the Commission, withdraw an amount of money not exceeding 25 percent of the total amount credited to his retirement savings account, provided that such withdrawal shall only be made after four months of such retirement or cessation of employment and the employee does not secure another employment.

It further stated that, where an employee has accessed the amount standing in his retirement savings account pursuant to subsection (2) of this section, such employee shall subsequently access the balance in retirement savings account only at the time of retirement.

Farouk Aminu, commissioner for Administration at PenCom had said, “Yes, it is your right as contributor to access this money in your RSA balance, but it’s advisable to avoid it if you can”

According to Aminu, what becomes of your retirement is a function of what you are able to save while in employment, so the idea of wanting to take the money in your RSA because you lost your job even when you do not need it is a wrong decision.

PenCom in its second quarter report ended 30th June 2021 approved the payment of N4, 430.37 million to 7,906 RSA holders under the age of 50 years, who were disengaged from work and unable to secure jobs within four months.

Julius, who worked in an advertising firm lost his job in December 2020 when a lot of companies embarked on retrenchment of workers following the impact of Covid-19 and some uncertainties in the economy.

Having approached his PFA four months after he stayed without job to access part of his pension savings, he was asked to complete the request form, after about a month he was paid.

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“I would have liked to take more but my PFA insisted I cannot take more than 25 percent since I was not yet retired, but for me it was a good relieve, he said.

According to him, the advantage he had was that his employer had paid his unremitted pensions deducted from his salary, just the week after he was relieved of his appointment. So, it was easy for my PFA to work out my 25 percent because it was meant to be both my accrued rights and what has been remitted to date, he said.

The objective of the CPS is to ensure that every person who worked in either the Public or Private Sectors in Nigeria including the self-employed persons receives his/her retirement benefits as and when due.