The National Pension Commission (PenCom) granted approval for the payment of N15.79 billion as death benefits to the administrators/legal beneficiaries of 5,562 deceased employees and retirees.
The commission made this known while speaking on the innovative strategies of the contributory pension scheme (CPS) in improving Nigeria’s retirement challenges.
The commission said the defined benefits scheme (DBS) presented significant challenges to retirees, leading to the introduction of CPS in 2004.
“Before the CPS, large pension liabilities made it impossible for the federal and state governments to meet their pension obligations to retirees. At the same time, the private sector retirement plans offered low pensions,” PenCom said.
According to the agency, the CPS revolutionised Nigeria’s pension and retirement landscape by introducing innovative solutions such as individual retirement savings accounts (RSA), minimum pension guarantee (MPG), and segregation of pension management from custody under its regulatory supervision.
According to PenCom, the CPS also facilitated the mobility of labour, contributors’ rights, retirement benefits payments, and the accumulation of long-term funds.
“The RSA allows participants to open individual accounts where contributions accumulate until retirement,” it said.
“The RSA eliminates pension liabilities, and once an employee exits active service, funds are available for immediate payment of retirement benefits. The RSA also allows members to make voluntary contributions to their RSAs, and PFAs must provide regular/periodic account statements to keep contributors informed.
“The CPS allows for easy labour mobility across sectors and different tiers of government. Once an RSA is opened and a personal identification number (PIN) issued to an employee, the number remains tied to the employee throughout their lifetime, allowing them to maintain their RSA for contributions from new employers.
“There is no need to open another RSA when changing jobs, only providing the new employer with the PIN and the PFA.
“Contributors under the CPS have the opportunity to select any PFA of their choice to open their RSA, transfer their account from one PFA to another once a year, and choose either the programmed withdrawal (PW) or retiree life annuity (RLA) method upon retirement.
“The PW offers a retiree a lump sum and regular monthly or quarterly pension payments throughout an estimated life span. In contrast, the RLA provides periodic payments to a retiree during his lifetime.”
PenCom said it approved 9,920 requests for retirement benefit payments in the first quarter of 2023.
The commission said N48.85 billion was approved as a lump sum, while monthly pension and annuity payment was N593.03 million.
PenCom also said it “granted approval to PFAs to pay N12.72 billion to 13,126 RSA holders under 50 who lost their jobs and could not secure new employment within four months, representing 25 percent of their RSA balances”.
In addition, the organisation “granted approvals to pay death benefits to the administrators/legal beneficiaries of 5,562 deceased employees and retirees in the sum of N15.79 billion during the period, indicating that the CPS provides financial security during retirement and temporary loss of employment”.
“The CPS also provided for a minimum pension guarantee (MPG) as contained in the PRA 2014, which is a provision for all individuals who have contributed for some years but have not accumulated enough to have a minimum pension,” the organisation said, adding that it is working to determine the minimum pension and effect implementation,” PenCom said.
“Furthermore, the CPS has generated a pool of long-term funds that have been invested in the economy, with N15.27 trillion generated as of January 31, 2023.
“The CPS has directly facilitated the transfer of resources over time and the pooling of funds in an efficient manner, significantly impacting capital formation, investment, and GDP growth.
“The CPS is necessary due to the challenges associated with the old DBS, including coverage, funding, transparency, and inability to pay retirement benefits, leading to the accumulation of enormous pension liabilities that are yet to be fully settled.”
The commission, therefore, concluded that the CPS has reformed pension administration in Nigeria, ensuring workers receive their retirement benefits “immediately after they retire”.