Programmed Withdrawal versus Annuity

Part 111 section 7 (1) of the Pension Reform Act, 2014 states that a holder of a retirement savings account (RSA) shall upon retirement or attaining the age of 50 years, whichever is later, utilize the amount credited to his retirement savings account for the following benefits-

a) Withdrawal of a 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  programmed fund withdrawals or annuity for life; in accordance with extant guidelines issued by the commission, from time to time, or

b) Programmed monthly or quarterly withdrawals calculated on the basis of an expected life span; or

c) Annuity for life purchased from a life insurance company licensed by the National Insurance Commission with monthly or quarterly payments in line with guidelines jointly issued by the Commission and National Insurance Commission

d) Professors covered by the Universities (Miscellaneous Provisions (Amendment) Act, 2012 shall be according to the University Act

e) Other categories of employees entitled by virtue of their terms and conditions of employment to retire with full retirement benefits shall still apply.

Section 7 (2) states that where an employee voluntarily retires, disengages or is disengaged from employment as provided for under subsections (2) and (5) of section 16 of this Bill, the employee may with the approval of Commission withdraw an amount of money not exceeding 25% of the total amount credited to his retirement savings account, provided that such withdrawals shall only be made after four months of such retirement or cessation of employment and the employee does not secure another employment.

Section 7 (3) states that where an employee has accessed the amount standing in his retirement savings account pursuant to subsection (2) of this section, such employee shall subsequently access the balance in the retirement savings account in accordance with subsection (1) of this section.

Lump sum

• Lump sum is a residual, there is no fixed percentage

• May be withdrawn before PW or Annuity, subject to RSA balance and monthly pension

• It is not automatic that retiree must get 50% of RSA as Lump sum

Programmed Withdrawal (PW)

Programmed withdrawal is a payment mode provided for under the Pension Reform Act 2004 as amended in 2014. In accordance with a template provided by the National Pension Commission (as may be updated from time to time) the calculation of the lump sum and monthly/quarterly withdrawal figures of a Programmed Withdrawal are done  to ensure payment to the retiree for life.

Annuity

Annuity is a written contract between a client and a life insurance company which in return for a premium will pay the retiree an annuity for life. An annuity is a series of payments made at regular intervals (monthly or quarterly).

Required Documents to process Programmed Withdrawal or Annuity

• Benefit Withdrawal Application

• 2 passport photographs

• Official notice/acceptance of retirement

• Last pay slip

•ny other evidence of annual total emolument

• CTC of Retirement Bond certificate (public sector-currently by direct remittance to RSA)

• Certificate of indebtedness (private sector)

• Terms & Conditions of employment of employee

• Life Annuity Agreement