Retirement and Benefits for Nigerians: Major Key Points of PenCom's Revised Guidelines
The National Pension Commission (PenCom) recently conducted the first thorough review since 2007 of the Regulation on Retirement and Terminal Benefits. And this revised regulation is set to take effect immediately.
As a pension contributor or retiree, you are entitled to know that this regulation guides the process of accessing all your retirement and terminal benefits under the Contributory Pension Scheme (CPS).
To put together this revision, PenCom consulted with key stakeholders. This is to ensure a more effective retirement benefits administration for all retirees and pension contributors.
What should you expect in the revised regulation?
The revised Regulation contains different new conditions on the following:
Pension Enhancement Voluntary Contributions
Temporary Access to RSA due to loss of job
Payment under the Micro Pension plan
Administrative Sanctions for violations by Pension Fund Administrators (PFAs) among others.
In addition to this, there are also noteworthy revisions to several existing provisions while more other provisions are made clearer.
In this article, we present to you some of the major key points of the revised guidelines. Here they are.
While the old regulation outlined the documents required for retirees to access benefits, the Revised Regulation has simplified the documentation process.
Now, PFAs must make efforts to ensure that all documentation prior to the retirement of the Retirement Savings Account (RSA) holder should be provided and concluded within a period of four months prior to the date of retirement.
All PFAs must also advise future retirees to check their websites and be acquainted with the CPS Retirement Pack, containing features of Programmed Withdrawal (PW) and Retiree Life Annuity (RLA) at least three months to the date of retirement. The pack also contains other salient issues that would guide the retirees towards a smooth retirement process.
This is to ensure that future retirees are properly educated on the methods through which they can access their benefits.
Non-confirmation of Employment Status by Employers
In addition, the Revised Regulation has simplified the provisions on the notification and documentation required for access to RSA due to temporary loss of job.
Temporary loss of job has been defined as a situation where “an employee voluntarily retires, disengages or is disengaged before attaining the age of 50 years and is unable to secure another employment after four months of the disengagement.”
The provision addresses situations where employers refuse to confirm the retirement or disengagement of their former employees.
Prior to this revision, a letter of acceptance of resignation or disengagement issued by the employer is mandatory for a pension contributor seeking payment of 25 per cent for temporary loss of job.
However, the Revised Regulation provides that where the employer fails/refuses to accept the resignation letter from the employee, the PFA shall write the employer confirming the employee’s resignation and ensure that an acknowledgement copy is kept as proof of receipt.
Where the employer fails to respond to the PFA’s inquiry within 30 days, the employer’s refusal is taken as acceptance of the employee’s resignation for the purpose of benefits payment.
Additional Lump Sum Payment
Significantly, in terms of lump sum payment, the Revised Regulation has clarified that the retirees shall be allowed to access additional lump sum provided that there are additional inflows of funds into the RSA from the employers.
However, the additional remittances shall first be applied to augment the pension up to 50 per cent of the retiree’s final salary, the retiree may choose to collect the entire additional remittances as lump sum.
Where the additional inflow into the RSA of a retiree-on-Retiree Life Annuity (RLA) is not up to 100,000, the amount is paid directly into the retiree’s bank account, subject to the PenCom’s approval.
RSA Consolidation before Payment of Benefits
The Revised Regulation has also clarified that the RSA must be consolidated before retirement benefits can be accessed.
A retiree shall only be entitled to access his or her retirement benefits upon consolidation of his or her RSA.
The components of an RSA at retirement shall consist of accrued pension rights or pre-act benefits (if any) for employees that were in employment before the commencement of the CPS, employer/employee pension contributions, returns on investment and a fixed portion of voluntary contributions (if any).
The new regulation mandates the PFA to take necessary steps to liaise with the employer and other relevant parties to ensure that all the entitlements of a retiree or deceased person are credited to his/her RSA for the purpose of determining the final RSA balance before processing of benefits.
Do you want to transfer your pension fund contributions to Oak Pensions? Contact us via www.oakpensions.com, email@example.com or call the Marketing Manager on 09087448661.