Looking into your retirement when there is still enough time

The National Pension Commission (PenCom) will begin from this week to hold a nationwide pre-retirement seminar in all the geo-political zones of the country for federal public service employees that would be retiring from service in 2018. For this group of people, the time for planning is over; meaning that whatever they have put in place before now, either from the organised Contributory Pension Scheme (CPS) or Additional Voluntary Contribution (AVC) into their Retirement Savings Account (RSA) will determine how much they will have to spend during their retirement. This is also the same with those in the private sector.

This article is focusing on those who still have some time to plan for their retirement because it may not have been done on you that ‘retirement’ is real. But it is important you sit back and view the future and actually look at how you plan to meet the needs that could become inevitable during that period.

Whatever may be the case, the critical issue is that retirement is real and will definitely come one day. How prepared you are will determine how well you are going to fare in the retirement journey.

Whether you retire happily or sadly, into relative wealth or into abject poverty, everything depends on the plans you make today. As you make your bed, so you will lie on it.

Thanks to the Contributory Pension Scheme (CPS) which was introduced in Nigeria in 2004 and recently revised through the 2014 Pension Reform Bill, pension administration in the country has been made much easier. Likewise, it has become a lot easier for an employee to choose how to retire through proper planning.

The clearly stated objectives of the CPS are: to (a) ensure that every person who worked in either the Public Service of the Federation, Federal Capital Territory or Private Sector receives his retirement benefits as and when due; (b) assist improvident individuals by ensuring that they save in order to cater for their livelihood during old age; and (c) establish a uniform set of rules, regulations and standards for the administration and payments of retirement benefits for the Public Service of the Federation, Federal Capital Territory and the Private Sector.

In other words, the CPS promises every employee minimal basic comfort in retirement, thereby reducing dependency in old age. But this cannot be achieved without the employee working consciously towards it. Therefore, if you desire to retire happily, if you truly wish to retire into the good life after a long working career, you need to plan for it. Here are some things you need to consider as you plan for your retirement.

First of all, what is the current status of your Retirement Savings Account (RSA)? If you consider how much you have in your RSA at present vis-a-vis your current age, how long you have worked already, how much time you have left before retirement, and how much goes into your RSA monthly, that will give you an idea of how much you would likely have in your RSA when retirement eventually knocks at your door.

The next question you need to ask yourself is what sort of lifestyle you want for yourself after retirement. Do you want to live like a king, in relative comfort or as a pauper? Do you want to tour the world to see all the beautiful islands that Mother Nature has generously bestowed on the world, or do you want to simply sit in a dilapidated hut in your village gazing into empty space with no food in your stomach? When you think about this and consider the amount you would have in your RSA on retirement, then you would know certainly whether you are on the right path.

Also, considering the present state of your health, you should ask yourself what your healthcare needs would be when you grow older and when you retire. Then you should consider your beneficiaries or dependents. Would you want to leave something behind for them in case of death? What would you want to leave behind for them? Considering the current status of your RSA, do you think you would be able to achieve that? If not, what do you do?

Indeed, the earlier you do the mathematics, the better. This will help you to know exactly what kind of retirement awaits you, whether or not there is really something tangible to look forward to after these long years of sweating it out in the workplace. It will also help you to know whether your present plan will do or whether you need a change of track. And if it becomes very clear that the cumulative accruals into your RSA won’t guarantee you a relatively good life or meet your needs at the end of your working career, then it may be time to begin to consider making additional voluntary contribution.

Additional Voluntary Contribution (AVC) refers to the additional sum an employee voluntarily contributes to his Retirement Savings Account besides the total contributions being made by him and his employer. AVC is meant to afford employees who might have need to plan for bigger pack the opportunity to do so while still in active employment. An employee willing to make additional voluntary contribution is advised to liaise with his employer to remit a certain additional amount of money alongside the statutory pension contribution to his chosen PFA. The money so contributed, alongside the employee’s statutory contribution, is invested by the Pension Fund Administrator (PFA) and returns generated are credited into the contributor’s RSA.

Then there is need for every employee contributor to the CPS to ensure the safety and growth of their contributions. Note that your PFA is mandated to periodically forward your RSA statement to you, which helps you to monitor the status of your account. However, you can also monitor the status of your RSA using any of the self-service channels provided by your PFA. And if at any time you discover that your monthly remittances are less than the amount being deducted from your monthly salaries, liaise with your employer showing your RSA statement for the period in dispute and ensure that the differences are resolved.

Finally, it is incumbent upon you as an employee to research into the available pension payment options (Programmed Withdrawal and Annuity) to assist you in making the right choice when you retire. If you have done all of this, then leave the rest for your creator, he determines what happens thereafter.