Withdrawal allowable under Contributory Pension Scheme
Withdrawal from Retirement Savings Account
The Contributory Pension Scheme (CPS) in Nigeria established by the Pension Reform Act 2004 appreciates the fact that workers would at a given point in time definitely have reasons to withdraw from their Retirement Savings Account (RSA) opened under the scheme, either voluntarily or involuntary. This is in keeping faith with the major objective of the scheme to 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.
Though section 3(2) of the Pension Act stipulates that no person shall be entitled to make any withdrawal from his Retirement Savings Account opened under section 11 of this Act before attaining the age of 50 years, as there are exceptions to all rules, the law identified certain conditions under which an employee can withdraw from his RSA.
The grounds of withdrawal allowable in the law include: Mandatory Retirement, Compulsory Retirement and retirement based on Medical Grounds. Whatever the reason for withdrawal is, the worker is entitled to certain benefits depending on age and condition of employment at the point of withdrawal.
Mandatory retirement
Mandatory retirement occurs when an employee disengages from active service at the retirement age or completion of the length of service based on the terms of his/her employment after attaining the age of 50 years. In this instance, the retiree will be entitled to the balance in his/her RSA. This could be disbursed either as an enbloc payment, provided the balance in the retiree’s account is less than N550,000.00 or as a combination of lump sum and programmed withdrawal payments being offered by Pension Fund Administrators (PFAs) or lump sum and annuity payments purchased from an insurance company.
Six months before retirement, the worker is requested to liaise with his Pension Fund Administrator and submit relevant documents including: official notice of retirement issued by the employer; a document confirming that the retirement is in accordance with terms and conditions of employment; last pay slip or evidence of total annual remuneration; and evidence of any accrued pension rights/acknowledgement of indebtedness as well as any outstanding pension contribution.
Upon retirement, the workers should provide at least the following document when payment is to be made, and this includes completed application form; means of identification including any of the following: national identification card, valid international passport, valid driver’s license; letter of confirmation of identity from his/her bank or notary public; bank account details: name of bank, branch or location of bank, account number, account name, evidence of account, retirement letter, one passport photo, birth certificate or age declaration, signed acceptance letter, filled retirement indemnity form, filled programmed withdrawal agreement form. With some PFAs you are notified within 48 hours a confirmation that the documents have been received via SMS. Then, at this point, the retiree could relax and enjoy his retirement.
Compulsory retirement
Compulsory retirement occurs when an employee is being disengaged or terminated from active service in accordance with the terms and conditions of service, before attaining the age of 50 years. This category of retiree can only access up to 25 per cent of the balance in their RSA six months after disengagement; the remaining balance can only be accessed after the retiree attains 50 years of age through a lump sum and programmed withdrawal or annuity.
An RSA holder who retires compulsorily before the age of 50 years and wishes to apply for 25 per cent of his RSA balance shall provide copies of the some documents listed under mandatory retirement above including: completed application form; official notice of retirement issued by his/her employer; a document confirming that the retirement is in accordance with terms and conditions of his/her employment; last pay slip or evidence of total annual remuneration; evidence of any accrued pension rights/acknowledgement of indebtedness (if an employee in the private sector or a self-funded government organisation), as well as any outstanding pension contribution.
Means of identification will include national identification card; valid international passport; valid driver’s license; letter of confirmation of identity from his/her bank or notary public; bank account details including name of bank, branch or location of bank, account number, account name, evidence of account, one passport photograph, birth certificate or age declaration.
Retirement on medical grounds
Retirement on medical grounds refers to a situation when an employee disengages from active service based on the advice of a suitably qualified physician or medical board certifying that the employee is no longer mentally or physically capable of carrying out the functions of his/her office due to total or permanent disability either of mind or body.
An RSA holder retiring on medical grounds can access the balance in his/her RSA account. This could be disbursed either as an enbloc payment (provided the balance in the retiree’s RSA is less than N550, 000.00) or as a combination of lump sum and programmed withdrawal payments or annuity.
An RSA holder retiring on medical grounds or his/her representative or employer shall provide the original copies of the following documents: a medical certificate issued by a properly constituted medical board or a suitably qualified physician; letter of notification of retirement issued by his/her employer also authenticating the medical certificate; and pay slip or evidence of total annual remuneration; evidence of any accrued pension rights/acknowledgement of indebtedness (if an employee in the private sector) and official notice of retirement.