Like organisations will do, take a stock of your pensions!

This time of the year is usually very important for organisations because it is period when they review their activities in the outgoing year, stack stock of their performance and begin to set agenda for the coming year. Just like organizations will do, experts say that individuals who want to get the future right must also review their past and project into the future. And what makes it important for an individual is that it enables you appreciate your current status- financial, investment, retirement, debts and state of your pension contribution or what the focus is.

In reviewing therefore our financial future, looking at our investment portfolio particularly our pensions, it is important to understand whether what we are contributing today with our employer under the Contributory Pension Scheme as provided in the Pension Reform Act 2014 is enough to take you where you want to be at the point of retirement.

It will help you know what you would be expecting at the time of retirement and whether it is capable of taking care of your needs at that time. Reviewing again would help you understand how your PFA is performing in terms of returns on investment and the quality of service you are getting from them.

If you have reviewed thoroughly and your finding is that what you and your employer is currently contributing to your Retirement Savings Account (RAS) with your Pension Fund Administrator is far below what you would want to have as pension size when you retire, then there is a solution to it.

The Pension Reform Act 2014 makes provision for additional voluntary contribution as vehicle to enable contributors augment their contribution to enhance their pension contribution.

So any individual desiring to enjoy pleasurable retirement should consider making additional voluntary contributions provided for in the Act.

The Act allows workers to make additional voluntary contributions into their RSAs beyond the minimum of 8 per cent deducted from the workers emoluments and 10 percent by the employer on monthly basis. This additional voluntary contributionis made from the employees’ salaries, that is, indirectly through his employer.

The PensionAct provides that “Any employee whom 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 Retirement Savings Account (RSA) and cannot be more than 100 per cent of employee’s emolument.

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 do you have left to work before you retire and what your pension value will amount to when 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.

It must also be noted that the employee is required to have an RSA to start the Additional Voluntary Contributions.

It attracts the same investment returns as your statutory pension contributions.

Again, you do not need a fresh registration to get started.

It will be helpful to stress that voluntary contributions are additional personal contributions that can be made alongside your RSA. 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 are 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 voluntary contributions to enable you monitor the growth of your voluntary contributions.

The National Pension Commission (PenCom) on 16th November 2017 released guidelines to govern withdrawals from Additional Voluntary Contributions (“AVC”).

In the past few years, the government has raised concerns about the frequency of withdrawals of AVC and the effect on the tax payable to the tax authorities.

The guidelines are aimed at curbing the high rate of AVC withdrawals and its attendant effect on tax accruing to the government. Consequently, the following rules will apply to AVC withdrawals with effect from 1st December 2017. The time frame for the withdrawal from an AVC will be once every Two (2) years from the last approved withdrawals date. Subsequent withdrawals shall be on incremental contributions from the date of last withdrawal.

Fifty (50 percent) of AVC contributions made by mandatory RSA contributors shall be available for withdrawal once in two years. Taxes for this category of AVC withdrawals will be paid only on income earned. The balance of fifty percent (50 percent) shall be used to enhance benefits at retirement.

Foreign and exempted contributors will also be allowed to make full withdrawals (100 percent) after 2 years subject to deduction of taxes on amounts remitted and income earned when the withdrawal is less than 5 years after contribution.

In addition, PFA’s have been mandated to report any single contribution into an individual’s account of  N5 million to the Economic and Financial Crimes Commission (EFCC).