CPS building savings culture among Nigerians

Savings culture in this part of the world including Nigeria was not a common practice before now, and so accounted for why poverty is prevalent amongst many people including the working class.

This therefore accounted for why many people despite their high level earnings during active working life ended up impoverished particularly in retirement. So, it’s a common factor that many people during retirement would largely depend on family and relations for survival. And situations why they had no relation to carter for them, they became problems to the society and government that actually had little or no social welfare scheme for its citizens.

This is despite the increasing efforts through the different financial sector regulatory authorities – The Central Bank of Nigeria (CBN), the National Insurance Commission(NAICOM) and other agencies to entrench financial inclusion through which citizens could imbibe the culture of savings and investment.

But the coming on board of the Contributory Pension Scheme (CPS) following the Pension Reform Act 2004 as amended in 2014 has expanded the band of savings habit, encouraging workers that beyond the contributory scheme employees could make further saving through their different PFAs.

As provided in the Act, workers are encouraged to do voluntary saving to enable them accumulate funds that would guarantee a more comfortable life in retirement.

The Act allows workers to make additional voluntary contributions into their Retirement Savings Account (RSA) beyond the minimum of 8 per cent deducted from their emoluments on a monthly basis. These additional voluntary contributions must, however be made from the employees’ salaries, that is, indirectly through his employer.

The Pension Act provides that “Any employee to which this Act applies may, in addition to the total contributions being made by him and his employer, make voluntary contributions to his retirement savings account.

Additional Voluntary Contributions is the discretionary contribution made above the mandatory 18 per cent employer and employee contributions into an individual’s RSA.

Before starting the Additional Voluntary Contributions, however, you need to look at your anticipated cost of living and level of expenditure when you retire, your monetary requirement to maintain your standard of living in retirement, how much time you have left to work before you retire and what your pension value could worth you retire.

After taking into consideration the above listed factors, decide on the extra amount of money you want to contribute on a monthly basis. After you have established your general retirement goals, determining how your financial resources will be invested, them make your mind and start immediately.

Remittance of voluntary contributions must also come through your employer to your Pension Fund Administrator. To make this easy, the payment schedule provided to the employers has a column indicating voluntary contributions, and this column will be filled with the amount of your choice if you have elected to make this additional contribution.

However, in view of the fact that Voluntary Contributions is not mandatory, it could be any amount of your choice. The voluntary contributions made will be remitted into your existing RSA PIN and your statement of account will also show the details of your contributions to enable you monitor the growth of your voluntary contributions.

Unlike the statutory contribution which has specific time when it can be accessed, employees have the benefit of accessing their additional contribution any time before retirement. However, enjoying a tax free withdrawal applies only after five years of making contributions.

If withdrawn after five years from the date the contribution started, it will be tax free which means it will be paid without deducting tax. The importance of having a quality life in retirement cannot be over-emphasised, when you consider that there will be a time when an agile man today will not be able to do any laborious job again as he was used to doing, because the body would have become weak.

At such a stage in man’s life, he will have to rely on reward from his past efforts, and this will only become exciting if only you have planned well to make your pension pay out large enough. The way to go is by taking to voluntary contribution through your Pension Fund Administrator.

CPS has turned the thoughts of retirement into a sweet dream for workers since they now look forward to good life after work. The future is in your hands. Take a wise decision today and be sure you have tomorrow in your hands.