Getting closer to your pensions…

Each time you find yourself in the midst of people talking about pension- their contributions and what happens to it particularly employees,you will begin to appreciate the need for continuous education in further realizing the objectives of the Contributory Pension Scheme (CPS).

So, both the employer and the employee must understand the scheme to appreciate its benefit by taking out time to know some of the critical issues as provided in the Pension Reform Act 2014. From contributor’s questions and concerns, experts at Stanbic IBTC Pension Managers here provide explanations to some of the burning issues.

The objective of the CPS among others is to ensure that every person who worked in either the Public Service of the Federation, Federal Capital Territory, States and Local Governments or the Private Sector receives his retirement benefits as and when due.

What is the minimum rate of pension contribution?

According to the Pension Reform Act (PRA) 2014, the minimum rate of pension contribution is 18 percent of monthly emoluments, where 8 percent is to be contributed by employees and 10 percent by employers. However, an employer may choose to bear the full responsibility of the scheme provided that in such a case, the employer’s contribution shall not be less than 18 percent of the employee’s monthly emoluments.

Who is exempted from the Contributory Pension Scheme?

The categories of persons exempted from the scheme arepersons mentioned in Section 291 of the Constitution of the Federal Republic of Nigeria 1999 (as amended) i.e. Judicial officers; Members of the Armed Forces, Intelligence and Secret Services of the Federation.

Any employee who is entitled to retirement benefits under any pension scheme existing before 25 June 2004 (the commencement date of the scheme) or who as at the commencement date has 3 or less years to retire.

Can I use my Retirement Savings Account balance as collateral for a Mortgage scheme?

Following the enactment of the Pension Reform Act (PRA) 2014, Section 89 (2) of the Act provides that a Pension Fund Administrator (PFA) may subject to guidelines issued by the National Pension commission apply a percentage of the pension assets in a Retirement Savings Account (RSA) towards the payment of equity contribution for a residential mortgage by a RSA holder. However, a guideline on this is still being awaited from the Commission.

I work in the private sector and have been with my current employer for two years, and no remittance has been made on my behalf.

Making remittances on your behalf is the sole responsibility of your employer, and so when you commence any employment it is important that you provide your employer with your PIN number and the details of your Pension Fund Custodian (PFC).

I am a public sector worker, I recently discovered that no remittance has been made on my behalf despite regular deductions from my salary?

There are two categories to this – Treasury funded organizations and those on the Integrated Personnel and Payroll Information System (IPPIS).

The National Pension Commission (PenCom) is responsible for remitting the pension contributions for treasury funded ministries, departments & agencies (MDAs). PenCom determines the actual pension benefits due to individual employees based on the Nominal rolls submitted by their employers. You are to liaise with your employer to include your correct details on the Nominal roll to be submitted directly to PenCom.

Contributions for ministries, departments & agencies (MDAs) under Integrated Personnel and Payroll Information System (IPPIS) are remitted by the Office of the Accountant General of the Federation. Kindly liaise with any federal pay office near you.

I haven’t received my RSA statement for quite a while. What is wrong?

PFA’snormally should send you statement of account for each quarter via SMS and email or post.

If you have not received your statement through any of these means, please check that you have not changed your phone number, email address or correspondence address in recent times. If you have, you will also have to update your details with your PFA; you may do this by logging on to your account or through the website.

Where my employer fails to make monthly remittances for me what can I do?

According to the Pension Reform Act (PRA) 2014, employers are legally bound to make contributions on behalf of their employees within 7 working days after the payment of salaries. The PRA 2014 also empowers PenCom, subject to the fiat of the Attorney General of the Federation, to institute criminal proceedings against employers who persistently fail to deduct and/or remit pension contributions of their employees within the stipulated time. Cases of unremitted pension contributions should therefore be brought to the notice of PenCom directly or through your Pension Fund Administrator (PFA).

Where it appears that my monthly remittances are less than the amount being deducted from my monthly salary, what do I do?

For Public Sector Workers: It is important to note that the National Pension Commission (PenCom) has discontinued the use of documentary evidence for remittance purposes. Public sector employees are to liaise with their employers to include their correct details on the Nominal Roll to be submitted directly to PenCom. The Nominal Roll is used by PenCom to retrieve employees’ details from various Ministries, Departments and Agencies (MDAs) to enable them determine the actual pension benefits due to individual employees based on their current grade levels and steps.

How do I monitor my contributions?

When an employee opens a Retirement Savings Account (“RSA”) with a Pension Fund Administrator (PFA), that PFA is required to issue periodic statements of account showing how much has been contributed as well as returns on investment generated from the contributions. PFAssend out periodic soft and hard copy statements to contributors email and correspondence address as well as Transaction Notification Services (‘TNS’) whenever there is a transaction on your RSA.Kindly liaise with your employer to include your details on the Nominal Roll to be submitted to PenCom.

For Private Sector Workers: Please be advised that contributions are credited to individual Retirement Savings Accounts (RSAs) with narrations based on advice received from your employer. You are advisedto liaise with your employer showing your RSA statement for the period in dispute.

How do I register for online access?

Once you open a Retirement Savings Account (RSA) with your PFA and your personal identification number (PIN) has been generated, an online account will automatically be opened for you and login details will be sent to you on your Pension Registration Certificate.

How can I make additional contributions into my account?

Voluntary Contributions (VC) are additional contributions that can be made alongside your mandatory contributions to your Retirement Savings Account (RSA). Remittance of voluntary contributions must come through your employer. The payment schedule provided to your employer, has a column for VC, this column should be filled with the amount you choose to contribute as VC.

Please note that your VC will be credited to your existing RSA PIN and your statement of account will also show the details of your VCs to enable you monitor the growth.

It is however important to note that Pension Fund Administrators (PFAs) are mandated to apply the current Personal Income Tax (PIT) rates on the income made on all VC where the contributions are withdrawn within 5 years of the date of contribution. VCs that are withdrawn after 5 years from the date the contribution was made will be tax free (i.e. will be paid without deducting tax).

What happens to my RSA and contributions when I change employer?

When a Retirement Savings Account is opened and a PIN created, this PIN remains with you for life. This means that a change of employer would have no effect on your Retirement Savings Account.

However, when you change your employer, it is important that you do two things:

Provide your PFA with your new employment details through their different means of communication.Provide your RSA PIN as well as our Pension Fund Custodian (“PFC”) account details to your new employer for remittance of your monthly contributions.

Can I access my funds before retirement if I have an emergency or a pressing need?

Your Retirement Savings Account is designed to provide you with an income upon retirement therefore funds typically cannot be accessed until one attains the age of 50 years or upon retirement (whichever comes later).

However, where a Retirement Savings Account (RSA) holder is temporarily unemployed before the retirement age (i.e. he/she is voluntarily/involuntarily disengaged, downsized, retrenched etc.) and has remained unemployed for a period of at least four (4) months without securing another employment, such an individual may apply for 25 percent of his/her current RSA balance.

Can I take all my money at once when I retire?

A retiree who is 50 years and above, may only access the entirety of his savings when his consolidated Retirement Savings Account (RSA) balance is below N500,000.00 . This will be paid as a lump sum since it may not be feasible to commit the balance to programmed withdrawal. In the case where you are above 50 years with RSA balances in excess of N500, 000.00, a minimum lump sum withdrawal of 25 percent is allowed and the maximum is subject to a formula that ensures is the amount left is sufficient to fund a programmed withdrawal that will generate at least 50 percent of your last salary at retirement on a monthly or quarterly basis for your expected life span or procure an annuity from a Life Insurance Company. Both modes of withdrawal are subject to approval by the National Pension Commission.

I recently resigned from my place of work; can I withdraw some money from my RSA?

In line with the Pension Reform Act (PRA) 2014 and the rules and regulations of the National Pension Commission (PenCom), a Retirement Savings Account (RSA) holder who retires voluntarily or disengages from employment either voluntarily or involuntarily, before the age of 50 years and is unable to secure another job within four (4) months, can withdraw 25 percent of the current balance in his/her RSA.

Can I use my retirement savings account balance as collateral for a loan?

Your Retirement Savings Account cannot be used as collateral for a loan as access to the funds is restricted until one retires or attains retirement age (whichever comes later). Therefore, if the Retirement Savings Account holder were to default on the loan the bank would not be able to recover the debt by calling on the funds as they are legally protected by the Pension Reform Act 2014.

What happens to my contribution when I die?

Upon the death of a Retirement Savings Account (RSA) holder, entitlements will be paid in full first and foremost to your named beneficiary under a Will. Where the RSA holder dies intestate (i.e. without a Will), entitlements may be paid to any of the following parties (in order of priority) provided that these parties present Letters of Administration alongside other documents that would be advised upon receipt of your notification:

The spouse and children of the deceased or in the absence of a spouse and child, to the recorded next-of-kin or any person designated by you during your life time or in the absence of such designation, to any person appointed by the Probate Registry as the administrator of your estate.

It is also important to note that we usually contact the registered next of kin on our records as soon as we receive death notification of our client.