Understanding the CPS and contributor’s concerns (2)

Awareness and continuous education on the benefit and workings of the country’s contributory Pension Scheme (CPS) would go a long way in sustaining the achievements of the scheme and building more confidence for higher penetration.

Therefore, providing explanations and answers to questions and concerns of contributors and the larger public is an issue that must be taken seriously by operators and stakeholders.

Here, this edition will look at some of the questions raised by contributors and members of the public and what operators’ responses are:

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.