As retirees under the nation’s contributory pension scheme take decision on where to invest their pension funds for retirement benefits, expert in insurance, Wale Akinrotimi, head, technical operations, Royal Exchange Prudential Life Assurance, discusses benefits of annuity for life.
Introduction
The Pension Reform Act (PRA) 2014 was signed by the President, Federal Republic of Nigeria, President Goodluck Ebele Jonathan GCFR on 1st July, 2014. It was an amendment to the Pension Reform Act that came into existence in 2004 exactly ten (10) years earlier.
There are some amendments to the 2004 Act that affect both employees who are still in service and those who are about retiring.
The PRA 2014 makes it clear that an employee cannot access the fund in his/her Retirement savings account not until he/she retires or attain age 50 years whichever is later.
It presupposes that if an employee retires before age 50years, he can’t access the fund in Retirement Savings Account, if an employee attains age 50 years and he has not retired, he/she can’t also access the fund.
He can only access the fund if he retires after age 50years or upon attaining age 50years if he had retired earlier. The whole idea behind these stringent conditions for accessing the funds is to forestall events of the past where retired persons went into penury immediately after retirement.
The only exception is where an employee looses his/her employment before age 50 and in this situation; he/she can only access 25 percent of the fund in his/her retirement savings account if he/she does not gain another employment within four (4) months.
S. 7 (1a) Pension Reform Act 2014 states that an employee on retirement shall procure Annuity for Life Policy or Programmed Withdrawal.
The lump sum for the procurement of Annuity for Life Policy or Programmed withdrawal must have been accumulated through series of employer/employee contributions into the Retirement Savings Account of the retiring employee throughout his/her working career.
The essence of this article is to enlighten those employees who are about retiring and want to choose Annuity for life Policy in line with S7 (1a) of the PRA 2014.
What is Annuity for Life Policy?
Annuity for Life Policy is a retirement instrument option for retiring employee offered by a Life Insurance Company licensed by the National Insurance Commission (NAICOM).
Annuity for Life Policy is a type of annuity contract that provides, in return for a Lump sum, a monthly or quarterly payment starting immediately after retirement and continuing for the rest of the retiree’s life.
The contract is often purchase by retiring persons who want an income that is guaranteed to last for the rest of their lives, no matter how long that might be.
Benefits of Annuity for Life Policy
Annuity for Life Policy has the following benefits:
1. Annuity pays the retirees as long as he/she lives. Just imagine a Mandela example, i.e. if he had retired at age 50, because he lived for 94 years, he would have received annuity income for 44years after retirement till death.
2. Annuity for Life Policy has a guaranteed period of ten (10) years. The implication of this is that if the retiree dies a year after retirement and he/she has just received one (1) year, the remainder of the retiree income for nine (9) years shall be paid to a named beneficiary.
3. Annuity for Life Policy is strictly regulated by government through National Insurance Commission (NAICOM). The books of each Life Insurance office are scrutinized periodically by government. Hence, no Life Insurance Company can mismanage annuity funds from retirees.
4. Annuity for retirees’ fund portfolio is audited annually by notable firm of Chartered Accountants and this create comfort for retirees as to the safety of the funds in the custody of a Life Insurance Company, the reports are submitted to government every year;
5. Annuity for retirees’ fund portfolio is valued each year by Actuaries of International repute to guarantee the solvency of the Life Insurance firm. This gives comfort as to the safety of retirees’ funds and the reports are submitted to government every year.
6. A retiree has the option of changing his retiree policy from one Life Insurance Company to another if for whatever reason after being with the first Insurance Company for two (2) years.
Conclusion
From the foregoing, Annuity for Life Policy remains a veritable option for retiree who deserves a restful and enjoyable retirement. My message to the retiree is simple, how I wish I am at this stage of yours to make a choice for my retirement instrument, I will choose Annuity for Life Policy over and over again because I know that “as long as I live, I will continue to enjoy my steady income”.
