How to get your retirement benefits on time and in full
Planning for retirement and understanding the procedures for accessing your retirement benefits is crucial to ensure a comfortable life after work. In Nigeria, the two primary methods for receiving retirement benefits under the Contributory Pension Scheme (CPS) are Programmed Withdrawal (PW) and Retiree Life Annuity (RLA). Programmed Withdrawal is managed by Pension Fund Administrators (PFAs), while Retiree Life Annuity is provided by insurance companies regulated by the National Insurance Commission (NAICOM).
This guide outlines how to process your retirement benefits, the requirements for accessing them, and the steps you need to take to ensure you receive your pension or annuity in full and on time.
1. Overview of Retirement Benefits
Retirement benefits in Nigeria under the CPS are available in two main forms: Programmed Withdrawal and Retiree Life Annuity. These are regulated by PFAs and insurance companies, respectively, ensuring retirees receive regular payments to sustain their lifestyle after retirement.
Programmed Withdrawal
Programmed Withdrawal is a product offered by PFAs. It allows retirees to withdraw a predetermined monthly or quarterly sum from their Retirement Savings Account (RSA) based on a calculation provided by the Standard Retirement Benefits Computation (SRBC) template.
Retiree Life Annuity
Retiree Life Annuity, on the other hand, is a pension product provided by life insurance companies regulated by NAICOM. This provides retirees with a guaranteed income for life, and the insurance company manages the retiree’s RSA to ensure this.
2. Programmed Withdrawal Explained
Role of the PFA
PFAs play a central role in managing the retirement benefits of contributors under the CPS. When a retiree opts for Programmed Withdrawal, the PFA ensures that all funds in the retiree’s RSA are consolidated, and the retiree can then select between receiving payments monthly or quarterly.
Eligibility Requirements
To be eligible for Programmed Withdrawal, a retiree’s RSA balance must be sufficient to provide at least 50% of their final salary at retirement. If the balance is inadequate, the retiree may be entitled to withdraw a lump sum of up to 25% of the RSA balance as a Regulatory Lump Sum.
3. Retiree Life Annuity Overview
Retirees also have the option to convert their RSA into a Retiree Life Annuity, which ensures a fixed income for life. Life insurance companies provide this annuity, and the retiree’s RSA funds are transferred to them to secure lifelong payments.
Conditions for Choosing RLA
A retiree can only choose the RLA option if their RSA balance is sufficient to secure lifelong payments. The retiree’s monthly or quarterly pension is calculated based on their RSA balance, age, and the terms offered by the insurance company.
4. Consolidation of Retirement Savings Account (RSA)
At the time of retirement, all contributions made into an individual’s RSA during their employment are consolidated. The PFA calculates the retiree’s pension using the Standard Retirement Benefits Computation (SRBC) Template, and this determines the monthly or quarterly payout.
5. Computation of Pension/Annuity Payments
The SRBC Template is a tool that guides PFAs in determining the appropriate pension or annuity payments. The calculation takes into account factors like the retiree’s RSA balance, age, and preferred payment mode (monthly or quarterly).
Monthly or Quarterly Payments
The retiree must decide whether they prefer monthly or quarterly disbursements, a choice reflected in a signed consent form. The PFA is responsible for ensuring the retiree receives their payments based on the chosen periodicity.
6. Lump Sum Withdrawals
Retirees are entitled to a lump sum withdrawal from their RSA, provided the remaining balance is enough to support a pension for life. If the balance is insufficient, retirees may withdraw up to 25% of their RSA under a regulatory provision.
Regulatory Lump Sum
Where a retiree’s RSA balance cannot support the minimum pension threshold, they may be allowed to take 25% of the balance as a lump sum. This ensures that retirees can still access part of their retirement savings even if they do not meet the full criteria for Programmed Withdrawal or Annuity.
7. Arrears of Pension Payments
A retiree is eligible for pension arrears for the period between the retirement date and the consolidation of the RSA. However, arrears are only payable for a maximum of six months for retirees from self-funded agencies or the private sector.
8. Suspension of Pension Payments for Re-employed Retirees
Retirees who secure employment after retirement may request to suspend their pension payments. When they decide to resume, the pension will be reprogrammed using the current RSA balance and the retiree’s age at that time.
9. Retirement Before Age 50
If a retiree disengages before age 50 and has accessed 25% of their RSA balance, they are only eligible for pension payments after reaching their 50th birthday unless they are re-employed.
10. State and Local Government Employees
Employees of State or Local Government agencies may have different pension laws under the CPS. The retirement benefits for these employees will be calculated according to their respective State or Local Government Pension Laws.
11. Periodicity of Pension Payments
A retiree can choose between monthly or quarterly pension payments. PFAs are not allowed to change the periodicity without the retiree’s written consent. Retirees may change their periodicity once a year if needed.
12. Pension Enhancement
Growth in RSA and Pension Enhancement
Retirees may receive periodic pension enhancements based on the growth of their RSA balance. If the RSA balance grows by at least 5%, retirees are eligible for an increase in their pension payments.
Recalculation of Pension
Using the Pension Enhancement Template, PFAs recalculate the retiree’s pension based on the current age and RSA balance. However, any growth in RSA balances is used strictly for enhancing pensions, not for additional lump sums.
13. Temporary Access to RSA Due to Job Loss
Accessing 25% of RSA Before Age 50
Employees who lose their jobs before age 50 may access up to 25% of their RSA after four months if they are unable to secure new employment. They must notify their PFA and submit the required documentation to access this benefit.
14. Required Documentation for Pension Processing
To process retirement benefits, retirees must provide their PFA with relevant documents, including proof of retirement, identification, and employment history. Ensuring all documentation is accurate and up to date will help avoid delays in pension processing.
15. Common Issues and Solutions
Delays in Processing
Delays in retirement benefit processing often result from incomplete documentation or miscommunication between the retiree and the PFA. To avoid delays, retirees should ensure their RSA is consolidated, all required forms are signed, and the PFA is regularly updated with any changes in employment or pension preferences.
Ensuring Timely Payments
Working closely with your PFA and keeping all information up to date will ensure that your pension payments are made on time. You should also verify that all steps outlined in the retirement benefits procedure are followed properly.
16. Frequently Asked Questions (FAQs)
1. Can I change my pension payment frequency after retirement?
Yes, you can change your pension payment frequency from monthly to quarterly or vice versa once every 12 months by informing your PFA.
2. What happens if my RSA balance is insufficient for monthly payments?
If your RSA balance cannot support 50% of your final salary as a pension, you may withdraw a regulatory lump sum of up to 25% of the RSA balance.
3. What is the difference between Programmed Withdrawal and Retiree Life Annuity?
Programmed Withdrawal is managed by PFAs and allows for periodic pension payments, while Retiree Life Annuity is provided by insurance companies and guarantees lifelong payments.
4. Can I access my RSA balance if I lose my job before age 50?
Yes, you can access up to 25% of your RSA balance after four months of job loss if you are unable to secure new employment.
5. Will my pension increase over time?
Your pension may be enhanced periodically based on the growth of your RSA balance, provided it grows by at least 5%.
6. How do I apply for a lump
You can apply for a lump sum withdrawal by contacting your PFA and submitting the required forms. The PFA will calculate the amount based on your RSA balance and eligibility.
