Nigerians tap N208bn pension savings as job crisis worsens

Nigerians who are out of work have accessed N208.56 billion of their savings under the Contributory Pension Scheme (CPS) to cushion the effects of job loss, data from the National Pension Commission (PenCom) have shown.

PenCom, in its second quarter industry performance report, revealed that from the inception of the CPS in 2004 to the end of June 2023, about 475,235 contributors, otherwise called Retirement Saving Account (RSA) holders, accessed the amount after they lost their jobs.

The mounting economic headwinds in the country has pushed more people into the job market in recent years, with the National Bureau of Statistics saying last year that about 133 million Nigerians were experiencing multidimensional poverty.

Inflation pushed an estimated four million more Nigerians into poverty in the first five months of this year, the World Bank said in July.

The Pension Reform Act 2014 states that “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 states 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.

The PenCom data showed that the private sector accounted for 453,013 of those who accessed their pension savings. In the public sector, 13,571 beneficiaries worked for the federal government, while 8,585 worked for state governments.

This represents temporary access to RSAs for withdrawal of 25 percent of RSA balances to employees who were disengaged, resigned or retired from employment before the age of 50 years and had not secured another employment after 4-months, according to the second quarter report.

According to the data, 8,453 RSA holders requested to access 25 percent of their RSA balances due to temporary loss of employment.

The data showed that 8,423 RSA holders’ requests were approved, while 30 were rejected because their ages were above 50 years.

“Out of the 8,423 applicants whose benefits were approved, 8,067 were from the private sector, while the remaining 290 were from the public sector,” the report said.

Agudah Oguche, chief executive officer, Pension Fund Operators Association of Nigeria, said the CPS has successfully reflected commitment for both increasing the number of beneficiaries and providing financial support to those who are entitled to it during critical times.

He said, “The CPS introduced by the Pension Reform Act 2004 and revised in 2014 recognises the importance of the contributor, his contribution and what happens to him while in employment. This is both when there is life and in death.

“With this realisation that there is life and there is also death, the CPS has taken care of the contributors, directly or indirectly, should either of the two happen, as long as the person has made his contribution through his employer.”

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Julius Obah, who worked in an advertising firm, lost his job in December 2020 when many companies were retrenching workers following the impact of the COVID-19 and increasing uncertainties in the economy.

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

“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 relief,” Obah said.

According to Obah, the advantage he had was that his employer had been regular in remitting his pensions. “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 had 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.