Programmed Withdrawal or Annuity for Life: Which scheme fits you?

When a retiree is leaving employment under the Contributory Pension Scheme (CPS) he or she is entitled to take decision on which scheme or a combination of schemes to enter into, for payment of his pensions. 

Section 7(1) of the Pension Reform Act 2014 says a holder of retirement savings account shall upon retirement or attaining the age of 50-years, whichever is later, utilise the amount credited to his retirement savings account for the following benefits-

Withdrawal of lump sum from the total amount credited to his retirement savings account provided that the amount left after the lump sum withdrawal shall be sufficient to procure a programmed fund withdrawal or annuity for life: Programmed monthly or quarterly withdrawals calculated on the basis of an expected life span; or Annuity for life purchased from a life insurance Company licensed by the National Insurance Commission (NAICOM) with monthly or quarterly payments in line with guidelines jointly issued by the PenCom and NAICOM.

Over time, there have been issues surrounding information and marketing of these two products. The law does not permit any operator (the Pension Fund Administrators or The Insurance Companies) to force or compel any retiree to sign for any of the schemes. Rather, the retiree is to be presented with these schemes and surrounding information, and based on the retirees circumstance and financial plan, he or she will decide which scheme or combination of schemes to sign for.

It is important to put in perspective here that no two individuals have the same financial characteristics or challenges, and so may require different schemes as the case may be.