As a pension contributor, how much are you following your retirement plans?

by | November 1, 2017 12:20 am

Whether you like it or not, retirement will come one day, and so it is an important reality for everyone. It’s a period during which a person is no longer able to work, meaning that income from paid employment ceases to come. So, the person would have to fund his personal expenses from a retirement plan or savings made during his or her active work life or a combination of sources.

However, it is important to plan for your life post-retirement if you wish to retain your financial independence and maintain a comfortable standard of living when you are no longer earning.

Ordinarily, this should be the best time of your life, when you can relax and enjoy your life by reaping benefits of what you earn in so many years of hard work.

To achieve a worry-free retired life, you are to be part of the planning process. So, it becomes important therefore that steps are taken with every sense of commitment towards ensuring that adequate preparations are made for it.

So, if there is anything that should be very important to you as an employee, it should be your pensions because it determines how you live in your retirement.

Given the importance, it is most advisable that you take active part in knowing how your pension is managed, right from your employers table to the mangers of the fund.

Being a participant in the Contributory Pension Scheme (CPS), as provided in the Pension Reform Act 2014, you must follow the system to appreciate the transparency and integrity of the scheme.

Every employee or contributor under the new pension scheme is expected to open a Retirement Savings Account (RSA) in his/her name with a Pension Fund Administrator (PFA) of his/her choice into which all his/her contributions and returns on investment are paid. An employee shall make monthly contributions of a minimum of 8 percent (formerly 7.5 percent) of the total of his/her monthly emoluments (i.e., monthly basic salary, transport allowance and housing allowance) while the employer in turn also contributes 10 percent (formerly 7.5 percent) into the employee’s RSA.

The Contributory Pension Scheme (CPS) which commenced in 2004 and amended in 2014 is fully funded, privately managed, with third party in custody of the funds and assets, and is based on individual accounts. It ensures that everyone who has worked receives his/her retirement benefits as and when due.

Though experts in pension management, the Pension Fund administrators(PFAs) and the Pension Fund Custodians (PFC’s) under the supervision of the National Pension Commission (PenCom) are there to manage your pensions and ensure it is safe. Being involved and taking active part to understand what is going on by asking questions where necessary brings out the beauty of the scheme.

Being therefore a part responsibility of the employee to make contributions to the pension purse, he or she must always and keenly monitor developments in his retirement savings account being managed by his Pension Fund Administrator (PFA).

Against this background, it is important that the employee (contributor) takes interest in knowing who manages his pensions. Every employee has the right to choose any PFA of his or her choice, depending on sense of judgment.

In signing-on to a PFA, check to make sure that such PFA follows the rules and regulations of the pension scheme as established by the Pension Reform Act and you are convinced they would create value for you. Ask other people who use the same PFA to know what their experiences have been and check or put them side by side with other PFAs before making up your mind.

Watch out to see that the PFA you are choosing is okay and friendly, in such a way that you as a client are treated as such; that they will be willing to contact you if need be; you can call to talk to them; they would listen and attend to your enquiries; they will also communicate regularly through whatever platform and you can go to their website for your account balance and other enquiries.

Your Pension Fund Administrator (PFA) in addition to sending you an SMS notification once a remittance from your employer has been processed into your RSA, will also send regular/periodic statements of accounts showing all your contributions and income from investments to your preferred address. You can also view your statement online by obtaining log in details from your PFA.

Your PFA must be able to explain to you the benefits of the scheme, through series of programmes and platforms such that you appreciate what you are getting involved in. It is therefore your right to understand every aspect of your pension contribution including utilization of the pension lump sum at the point of retirement.

Here you need to understand what programmed withdrawal managed by the PFAs and supervised by the National Pension Commission (PenCom) or annuities managed by life insurance companies and supervised by the National Insurance Commission (NAICOM) means in retirement and how they affect your individual characteristics.

It is also within your right to ask your PFA to provide you details of fund utilization. If you look at your statements which you will get every three months, you will see that the number of units have increased with every contribution you make.

Make sure that every month, and not at year end, that your money is increasing and you are seeing progress in terms of fund size and returns on investment. Compare it with what other PFAs are giving to your known friends or colleagues that are on the same salary level with you. Always keep checking to ensure that your retirement savings account is improving. Check to ensure that they are doing well and if you browse the internet, you can check on their website with what others are doing. Make sure you want to deal with a PFA that have branches for service coverage, so that if you move from one local government or state to another, your PFA is there to serve you well.

Check that their locations are easy for you to reach, and that they send SMS alerts, give you statement of accounts and they are online.

The whole essence of the pension scheme being 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, gives the employee contributor rest of mind to continue his working career.

While this would provide the basic comfort in retirement, employees have the opportunity to boost their savings to guarantee a higher level of comfort in retirement. This is through a personal pension plan, which could be worked out with your PFA on request.

Apart from ensuring that every worker receives his entitlement as and when due, the other objectives of the scheme includes to assist improvident individuals by ensuring that they save in order to cater for their livelihood during old age.