Annuity fund assets now to be held by PFC

Following an agreement reached last week by the National Pension Commission (PenCom) and the National Insurance Commission (NAICOM) on the administration of retiree life annuity as a mode of retirement benefit under the Pension Reform Act 2014 (PRA 2014), the annuity fund assets will now be held by Pension Fund Custodians (PFCs), chosen by the life insurance companies.

They also agreed that all new annuities purchased or being processed shall therefore be domiciled in the dedicated account with the PFC, while the treatment of all existing retiree life annuity funds and assets would be dealt with upon issuance of the Joint Regulations, expected in the next three months.

Specifically, both NAICOM and PenCom re-affirmed the existence of Programmed Withdrawal and Life Annuity as modes of payment of retirement benefits under the PRA 2014.

Part 111 section 7 (1) of the Pension Reform Act, 2014 states that a holder of a retirement savings account (RSA) shall upon retirement or attaining the age of 50 years, whichever is later, utilize the amount credited to his retirement savings account for the following benefits-Withdrawal of a lump sum from the total amount credited to his retirement savings account provided that the amount left after the lump sum withdrawal  shall be sufficient to procure  programmed fund withdrawals or annuity for life; in accordance with extant guidelines issued by the commission.

Programmed Withdrawal (PW)

Programmed withdrawal is a payment mode provided for under the Pension Reform Act 2004 as amended in 2014. In accordance with a template provided by the National Pension Commission (as may be updated from time to time) the calculation of the lump sum and monthly/quarterly withdrawal figures of a Programmed Withdrawal are done to ensure payment to the retiree for life.

Annuity

Annuity is a written contract between a client and a life insurance company which in return for a premium will pay the retiree an annuity for life. An annuity is a series of payments made at regular intervals (monthly or quarterly).