The National Pension Commission (PenCom), has made a new provision of a lumpsum payment (bulk settlement) to retirees with insufficient Retirement Savings Account (RSA) balances, to address some of the issues of low monthly pensions.
Specifically, the provision allows the Pension Fund Administrators (PFA) to pay a retiree the entire sum, where the RSA balance cannot provide a monthly/quarterly pension or annuity of at least one third of the prevailing minimum wage.
Prior to this provision, lumpsum payments were pegged at a specific monetary threshold. However, this has become inadequate due to varying economic realities. The new provision according to PenCom would address the dynamic economic circumstances as indicated by the National Minimum Wage.
It further buttresses PenCom’s efforts at ensuring that retirees receive meaningful periodic pensions under the Contributory Pension Scheme (CPS).
Following its recent revised Regulation on Retirement and Terminal Benefits which it noted is for immediate implementation, the Commission said the new provision on Pension Enhancement for retirees under the programmed withdrawal (PW) mode was introduced in the Revised Regulation that imbeds PenCom’s commitment to boosting the monthly pension of retirees.
It further noted that the Revised Regulation made new provisions to address issues on the payment of benefits to Micro Pension Plan (MPP) contributors, noting that the payment of the contingent and fixed portions of the contributions under the MPP, shall be in line with the guidelines on the Micro Pension Plan, issued by PenCom.
However, for the purpose of accessing the fixed portion of the MPP contribution, the MPP contributor must not be less than 50 years of age.
Also, the revised regulation provides that where an employee is missing, the employer or next of kin/legal beneficiary of the missing person shall notify the PFA of the disappearance after a minimum period of 12 months with proper identification.
Where the PFA is satisfied with the identity of the next of kin/legal beneficiary, then documentation and verification shall commence and upon receipt of the Missing Person Notification Report and copies of the supporting documents, PenCom shall, within 10 working days, constitute a Board of Inquiry (BOI) with members drawn from the Commission, Police Criminal Investigation Department and other key stakeholders.
“If the BOI decides that the pension contributor is actually missing, then the process of benefits payment to the person’s next of kin/legal beneficiary will commence.
“It has been observed that some RSA holders who had been reported dead and all benefits paid to their legal beneficiaries, reappear after additional amounts are remitted into their RSAs. The Revised Regulation provides that where an RSA holder is reported dead, the PFA shall write to the bank of the deceased informing it of the demise and advising that the deceased’s bank account/BVN be flagged off.
According to the Commission, to address the challenges faced by employees who wish to access their Nigeria Social Insurance Trust Fund (NSITF) contributions, the Revised Regulation established conditions applicable to retirees from the private sector with NSITF benefits, which NSITF transferred at the implementation of the CPS.
It provides that any employee who retires and has NSITF contributions shall notify the PFA of his/her intention to withdraw the NSITF contributions. A PFA shall request the retiree to provide necessary documents and application to access the NSITF part of the RSA balance. A PFA shall forward all requests to access the Pre-Act portion of the RSA balance to the Commission for no-objection.
Recall that the maiden Pension Enhancement was conducted in December 2017, sequel to an analysis of the balances in the RSAs of retirees receiving pensions under the Programmed Withdrawal (PW) mode.
The balances of the RSAs of most retirees were used to increase their monthly pensions.
According to PenCom, the maiden Pension Enhancement resulted in increased monthly pensions for 64,076 retirees.
The second enhancement was conducted in February 2020, which resulted in enhanced pensions for 86,108 retirees.
“The revised Regulation has provided that there shall be a periodic pension enhancement for retirees on Programmed Withdrawal based on the Return on Investment of funds in the RSA and the Commission’s directive.
“Retirees with a minimum of five per cent growth in their RSAs, from the date of initial programming or their last enhancement date, shall be entitled to receive enhanced pensions.”
PFAs have been mandated to review the retirees’ RSA balances at periodic intervals in order to determine eligibility for enhancement, as may be directed or specified by PenCom.
“A Pension Enhancement template has been provided for the purpose of re-computation of the enhanced monthly or quarterly pensions to guide the PFAs accordingly,” a statement from the Pencom read in part.