CPS: Financial planning for a comfortable retirement

An honest assessment of the perception and believe of a large number of Nigerian workers on the country’s Contributory Pension Scheme (CPS) no doubt shows positive, sustainable and also a system that breeds a lot of confidence.

CPS which came following the enactment of the Pension Reform Act 2004 and revised in 2014 elicit strong enthusiasm and hope for contributors who are looking forward to a comfortable old age.

They believe generally that not only would they get their pensions when they retire from formal employment, but that it would enable them pay their bills and live a healthy life in retirement.

While the CPS no doubt provides at least a minimum comfort in retirement, it’s important that those who seek extra comfort should make additional savings and investment to enjoy such privileges.

Is the expected benefit from your CPS all you would need to enjoy a comfortable retirement? The answer is ‘YES’ and the answer is also ‘NO’, depending on where you are coming from and where you want to be.

It is ‘YES’ if you have accumulated so much money, meaning that your current pay is huge enough and quite a large sum goes into your Retirement Savings Account (RSA) monthly. But still, it can never be said to be enough if you wish to maintain your present standard of living even in retirement.

But if it is ‘NO’, it then means that what you have accumulated is small, and you probably do not have a long time before you retire from employment.

While the CPS no doubt has provided the opportunity for voluntary contribution to augment the statutory rate of contribution which was recently increased following the Pension Reform Act 2014 to 8 percent for employees and 10 percent for employers of total emoluments, experts say saving and making income generating investments would provide a more comfortable platform to enjoy retirement, and put less pressure on your pension check.

They say that through proper planning, a person can make various investments, each of which can be earning a stream of income.

At a pre-retirement seminar organised by one of the Pension Fund Administrators (PFAs) in Lagos recently which focused on what becomes the employee after retirement, particularly as its affects payment of bills, healthcare, socials, income generation and family- emphasised the need for workers to begin to think about their future and what next after retirement.

It points to the importance of planning ahead of the retirement date, by fashioning out what to get on with in retirement, as an expert puts it taking an investment risk with your pension lump sum or thinking of building a house with your pension lump sum could be suicidal if not properly executed.

This may require that some months or a year before you exit from employment, you undergo through a course or programme in the field you want to invest in or the type of business you want to put your money so that you would have learnt other peoples mistakes, secrets of the business and how you can make success out of it.

Long before you have decided to operate your own business, it would be very useful for you to take advantage of courses or try to learn from various people with that type of information, says expert.

You could also get your employer to arrange these types of courses for staff at your workplace. Your own curiosity should cause you to keep asking all types of businessmen for advice on how to succeed in operating your own business, as their experience can be very valuable to you.

Whatever investments you are to make, it is better undertaken through honest channels and trusted partners, as many people out there are like hawks who want to take advantage of your ignorance to enrich themselves because they are aware that you are retiring soon and may have some liquid cash.

So, don’t be surprised that as you near retirement, there would be several offers from people genuine and fake, promising to do this and that because they have received your date and know you would have some cash to invest. However, fabulous opportunities exist if one can explore and diversify into new ventures.

Services

Beginning from around your environment, are there markets for some services in your neighbourhood? The answer to this question for those who are enterprising is always yes.

Agriculture

Investment in agriculture is one that would not look for market. You can start from a small garden and make it grow.  At a very modest level, a person can have a few fruit trees on his plot in his village or on one that he has acquired elsewhere. This could be implemented in phases and over time it grows to generate income.

Real Estate

Owning plots and building is still one of the best investments that a person can make. One very important aspect of real estate properties is that their market values often increase faster than the rate of inflation.

Retirement explains all the psychological and physiological challenges encountered by most workers just before they retire and when retirement dawns on them.

From human and contemporary perspectives, retirement should be viewed as a journey, not a destination. Therefore, in the course of the journey, you are to smell the roses as you proceed from one phase to another, so that the trip can be exciting, less traumatic and dramatically eventful.

What is most important is the decision you take. Evaluate the decisions you are about to take and take one that would serve you in good stead. The pain of a good decision is temporary, while the pain of a bad decision is permanent.