No need for worries, your pension saving is foolproof

If you have the opportunity of listening to two or more employees discussing these days, especially in the workplace, it is most likely that they are talking about their welfare. If you cross check, they would be talking how they are treated by their employers, how promptly their salaries are paid, and what other incentives in form of fringe benefits are available to make them more dedicated to their duties.

For workers in the Public Service of the Federation, the Federal Capital Territory and private sector organisations having more than five employees and complying with the Contributory Pension Scheme (CPS), which was introduced in 2004 to replace the old pension scheme, they are also concerned about the safety of the monthly deductions from their salaries in the name of pension, in addition to the above general worries.

Many of them ask such questions as whether, on retirement, they would really be able to access all the money deducted from their salaries throughout their working lives, or whether they would be told cock-and-bull stories. They are also worried about what might happen to their savings, especially for those working in one-man firms, in the event of the death of the business owner, going by the fact that from experience, many one-man companies in Nigeria hardly survive their founders.

So, they ask, what if the company they are working for folds up on the death of its owner? They also want to know whom they can turn to when they find themselves in helpless situations.

Additionally, while it is easy for them to monitor their savings and other accounts with deposit money banks, having access to the accounts as frequently as they wish, making deposits and withdrawals as often as they desire, the same cannot be said of their Retirement Savings Accounts (RSAs). For them, therefore, they do not see what control they have over their funds in such RSAs. As such, they fear that it might to be worth their suffering at the end of the day.Expressing these worries openly, one employee once asked, “How can I really call it my account if I cannot withdraw money from it as I do with my savings accounts with commercial banks?

And even after attaining 50 years of age or following other conditions specified, which are conditions for anyone to access the RSA, what is the guarantee that the money will be available when needed, especially considering what happened with the past pension schemes in this country?”

The first point to make is that justified as these workers may be in expressing their worries, the fact remains that these worries are unfounded. In fact, there is no need to worry because the contributory pension scheme is structured in a way that it is a safe, secured and guaranteed pool of funds whose aim is to ensure that every person who worked in either the Public Service of the Federation, Federal Capital Territory or Private Sector has something to fall back on at retirement.

It is fully backed by an Act of Parliament. The CPS was established by the Pension Reform Act of 2004, with the following objectives: “(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”.

The scheme provides for 15 percent of the employee’s monthly emolument contributed between the employer and employee be paid into a retirement savings account (RSA) domiciled with a chosen pension fund administrator (PFA). The scheme is contributory in the sense that the employee contributes half of the 15 percent (7.5 percent) deductible from his salary, while the employer contributes the other half.

Although Section 3 (2) of the Act establishing the CPS states that “no person shall be entitled to make any withdrawal from his retirement savings account opened under section II of this Act before attaining the age of 50 years”, there are exceptions or special conditions under which the funds can be accessed, such as death of the contributor. Since the scheme was established by an Act of Parliament, it then means that it is fully backed by law and, therefore, leaves no room for doubt about its legality.

Secondly, the way it is structured, the scheme is foolproof. This is because no one has access to the fund, including fraudsters and cyber criminals; not even the account holder. Each account holder has a unique account number and a Personal Identification Number (PIN) with which to access the account, but only for the purpose of checking of balance. So, even with the PIN, neither the account holder nor a third party can tamper with the money in the account.

In the case of the employer, even though he is the one that remits the monthly contribution to the Pension Fund Administrators (PFAs), once the money has been remitted, the employer can no longer access it. And since the retirement savings account is not domiciled with the employer but with the PFA, whether the company continues running or folds up is immaterial. The fund in the employee’s account remains safe.

Similarly, neither the Pension Fund Custodian that keeps the pension fund nor the Pension Fund Administrator that manages it has access to the money. The money in an employee’s account is accessible only by the employee after the attainment of the age of 50 or on meeting other conditions stipulated in the Pension Act.

So, don’t be troubled. Just relax, feel at ease, work hard now that you have the strength, ensure that the monthly deductions from your salary are promptly remitted to the appropriate PFA, and then rest assured that at retirement, you will have a pool of fund to sustain you through old age.