Is my pension contributions safe?

Are you one of those worried about the safety of your pension contributions? Are you always thinking the old pension scheme, which had challenges of embezzlement and mismanagement is the same with the current contributory scheme? Have you been asking how and when to access your pension funds? Or are you worried that government can take the money are you will not get your money back?

Here are answers to some your concerns, as provided by experts in the industry.

How can I be sure that my contributions are safe?

All those managing or keeping custody of pension funds and assets will be licensed and continually regulated and supervised by the National Pension Commission.

What is the guarantee that the pension funds under the CPS will be well managed and not diverted for other purposes?

The functions of the Pension Fund Administrator (PFA) and custodian are clearly spelt out in the Pension Reform Act 2014. The Act provides adequate safeguards against the misuse of the pension funds and assets by any operator.

What happens if a PFA fails or is liquidated?

The pension funds and assets in the Retirement Savings Account (RSA) are kept by the PFC and as such the liquidation of the PFA will not affect the funds and assets. Besides, every PFA is expected under the Pension Reform Act 2014 to maintain a statutory reserve funds as contingency fund to meet claims for which it may be liable as may be determined by National Pension Commission.

Who can I complain to if I have a problem with a PFA?

The Pension Act 2014 allows any employee to complain about any PFA to the National Pension Commission.

What is the role of the government in the new pension scheme?

The federal Government has established the National Pension Commission and charged it with the responsibility of regulating and supervising new pension scheme.

Can the government take or use the money in my RSA for any purpose?

The Government cannot temper with the pension funds in you RSA, because the Government cannot have access to the account. Besides, the Government is primarily concerned with ensuring the safety of the money in your RSA through the enforcement of strict rules and regulations.

Will inflation and devaluation of the naira not erode the value of the pension contributions?

It is the duty of the PFAs to administer the contributions and invest in such a way that will ensure safe and reasonable returns on investment. The reserve fund created by the PFAs under the Act would compensate for any erosion of the value of the contributions.

How compulsory or voluntary is retirement especially in the armed forces to be handled under the new scheme, if this happens before the age of 50 years?

Under the Pension Reform Act 2004 as amended in 2014 a person can voluntarily retire or be compulsorily retired before the age of 50 years on the ground of medical advice, permanent disability or due to particular terms and conditions of employment. If any person retires under any of the foregoing circumstances, he is entitled to withdraw from his RSA even though he was under the age of 50 at such retirement; provided that, in the case of retirement due to particular terms and conditions of employment, the contributor does not secure another employment after four months from the last employment.

What is the minimum of pension guaranteed under the new scheme?

The minimum pension guarantee shall be determined from time to time by the National Pension Commission.

Is there adequate representation of all stakeholders on the board of the commission, or is it dominated by government appointees?

There is adequate representation of relevant stakeholders in the board of the National Pension Commission, which comprises of Representatives of the Government, Nigeria Labour Congress, The Nigerian Union of Pensioners and The Nigerian Employers Consultative Association.

Does the pension reform act reflect the application of the principles of transparency and accountability?

Yes. The new pension scheme entrenches the principles of transparency and accountability as reflected in the reporting requirement of the PFAs and PFCs to both the contributor and the National Pension Commission. An employee has the right to choose who manages his RSA and the right to receive statements of his account on quarterly basis with details of contributions made and returns on investments.

What is the minimum period required by an employee to qualify for pension under the new pension scheme?

There is no qualifying period for pension. If an employee works for an employer for one month, his pension contribution will be paid by the employer into the employee’s retirement savings account for that month. If the employee moves on the work for another employer for another year, his pension contribution will be paid by the second employer for another 1 year and it goes on and on like that.

When will I have access to money in my RSA?

Access to the RSA will only be allowed upon retirement. If an employee retires at the age of 50 years or more he/she can have immediate access to the RSA. similarly, if an employee retires before the age of 50 years due to mental or physical incapacity, he or she can have immediate access to his/her RSA. Whereas an employee who retires under the age of 50 years in accordance with the terms and conditions of employment will not access the RSA until after four months of such retirement if he/she does not secure another employment.

Will gratuity be paid under the new scheme?

Upon retirement, an employee can withdraw a lump sum (by whatever name called) from the balance standing to the credit of his/her RSA provided the balance after the withdrawal could provide an annuity or fund monthly payment that would not be less than 50 percent of his monthly pay as at the date of his retirement. However, an employer may choose to pay any other severance benefits (by whatever name called) over and above the retirement benefits payable to the employee subject to the terms and conditions of his employment.

Should gratuity be included in the actuarial valuation for purposes of determining accrued pension rights to be transferred from the old scheme into the RSA?

If at the commencement of the Pension Reform Act 2004, the employee is entitled to gratuity (if he were to retire on that date), the gratuity shall be computed and included in the actuarial valuation as part of the accrued pension rights of such employee.

Are pension contributions taxes free?

Contributions to the new pension scheme are tax free.

Will tax be paid on the profit made from trading with the money in the retirement savings account (RSA)

Tax will be paid on the profit made from trading with the money in the Retirement Savings Account.

How will I benefit from the new pension scheme?

The new pension scheme will ensure that you receive your pension after retirement without delay.

How will the new pension scheme help the economy?

There will be a huge pool of long term funds available for investments, which will lead to national economic development.

How can I know what is happening with my money?

Pension Fund Administrators (PFAs) will issue regular statements of accounts and profit from investments to the employees.

Can I withdraw any portion of the amount in my RSA before retirement?

Withdrawals from the RSA can only be made upon retirement. However, where an employee makes additional of voluntary lump sum contributions into the RSA, he can withdraw such money before retirement or attainment of the age of 50 years.

What happens to the balance in the RSA after any initial lump sum withdrawal?

The balance in the RSA will be used to procure an annuity that provides regular income to the contributor or fund a programmed withdrawal.

What is a programmed withdrawal?

A programmed withdrawal is a method by which the employee collects his retirement benefits in periodic sums spread throughout the length of an estimated life span.

What is an annuity?

An annuity is an income purchased from an approved life insurance company which provides monthly or quarterly income to the retiree during his/her lifetime.

What happens when an employee who has been contributing under the new scheme dies before his retirement?

Where an employee who has been contributing under the new pension scheme dies before his/her retirement, his retirement benefits shall be paid to his beneficiary under a will or the spouse and children of the deceased or in the absence of a wife and child, to the recorded next of kin or any person designated by him during his/her life time or in the absence of such designation, to any person appointed by the probate registry as the administrator of the estate of the deceased.

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.

Kindly liaise with your employer to include your details on the Nominal Roll to be submitted to PenCom.

We assure you that where more remittances are made on your behalf, your account will be credited and you will be notified accordingly

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. Therefore, we advise you liaise with your employer showing your RSA statement for the period in dispute.

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.

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

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 furnish your PFA with the details of your new employers. At the same time, furnish your employers with your PFA and PFC details.