How to access your retirement benefits under the Contributory Pension Scheme (1)
T he processing and collection of retirement benefits is the last phase of the Contributory Pension Scheme (CPS). The Pension Reform Act (PRA) 2014 and the Regulations for the Administration of Retirement and Terminal Benefits, issued by the National Pension Commission make provision for the rules and procedures for retirement and accessing of retirement benefits.
The Act stipulates that a Retirement Savings Account (RSA) holder shall access his/her RSA upon retirement or attaining the age of 50 years, whichever is later. By this provision, the Law recognises the contractual retirement age which an employee has signed with his employer, provided such an age is not less than 50 years.
These include the general retirement age of 60 years or 35 years of service in the public sector; the attainment of 70 years for Academic Staff in the Professorial Cadre; or 65 years for non-academic staff as provided in the Universities (Miscellaneous Provisions) (Amendment) Act 2012. Such an RSA holder may utilise the balance in the RSA for retirement benefits in two principal modes.
He may use such balance for Programmed Withdrawal with his PFA for monthly or quarterly pensions calculated on the basis of an expected life span; or to procure Annuity for life from a Life Insurance Company licensed by the National Insurance Commission (NAICOM), with monthly or quarterly payments.
Whichever may be the option chosen by the retiree, he may withdraw a lump sum, provided that the amount left shall be sufficient to procure a programmed fund withdrawals or annuity for life, in accordance with extant guidelines issued by the Commission from time to time; The Law further provides that an employee shall not be entitled to make any withdrawal from his RSA before attaining the age of 50 years, but give room for a few exceptions.
One of such include employees who retire, disengage or are disengaged from employment on the advice of a suitably qualified physician or a properly constituted medical board due to mental or physical incapacity as well as total or permanent disability either of mind or body. Also included are employees who disengage or are disengaged from employment before the age of 50 years and are unable to secure another employment within four months of such disengagement are allowed.
These groups may, with the approval of the Commission, have temporary access to their RSAs by withdrawing an amount of money not exceeding 25 percent of the total amount credited to their respective RSAs. If and when this RSA holder secures another employment, the Law allows him/her to be reintegrated into the CPS. In implementing these provisions, the National Pension Commission issued the Regulation for Administration of Retirement and terminal Benefits which requires that a potential retiree liaises with his PFA about six months to his retirement so as to commence the process early enough.
The PFA is expected to enlighten the intending retiree on the features of programmed withdrawal and annuity which are the two modes of withdrawing pension benefits. The RSA is expected to have been consolidated at the point of retirement by ensuring that all the components are present. These include the accrued pension rights), the contributions made under the CPS (employer and employee portions) and the income generated on the RSA to date by his PFA.
The potential retiree would be required to provide some documents to assist the PFA to process his/her retirement benefits. Amongst these are the Retirement letter issued by the employer and the Pay slip or any evidence of total monthly emolument. The retiree is also expected to provide his bank account details for payment of pensions.
When all the monies have been credited to his RSA, the retiree will be required to contact or be invited by his PFA to discuss the methods by which he intends to withdraw his retirement benefits and thereafter seek the Commission’s approval for the payment of such benefits. The whole of essence making preparations in advance is to ensure that the retiree starts to collect his pension the month following the month of his retirement.
Where the retiree opts to purchase retiree life annuity, he will be required to obtain quotes for annuity from an approved insurance company which will be contained in a Provisional Agreement to be submitted to the PFA for approval of the Commission
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