The agitation for the withdrawal of 75 per cent pension lump sum payment is wrong, Managing Director, IEI Anchor Pensions Managers, Mr. Glory Etaduovie.
Etaduovie in a report said the upfront payment is illusory and distractive.
He added that a nation that saves and invests well, grows, which is what is one of the objectives of pension.
Etaduovie, who said pension boosts infrastructure investment and development, stressed that it bridges critical development gaps.
He said: “It is a buoy for the capital market, stimulating growth in the economy and the employment. This fund must be jealously protected. The ratio of pension assets to the Nigerian Gross Domestic Product (GDP) was just eight per cent as at end of 2020. This is far from what obtains in the world. Netherlands was 214 per cent in 2020; United States was 156.5 per cent; South Africa 78.8 per cent; and South Korea 61 per cent.
“This subject of 75 per cent upfront pension lump sum payment agitation for retirees has been reverberating in the recent past. It is of grave concern for all, the industry, the public, the government and even the pensioners. Some industry members and experts have wondered if what is being requested for is properly understood. Ordinarily, nothing should be wrong with taking what is yours legally.
“The fact that you live long enough to receive any part of your pension in your account is exciting. It is well deserved, having worked and earned it. However, is the easy way out seemingly the best? Who does not like the good feeling of some good money ‘cooling’ in his or her account? The answer lies in understanding the purpose and intention of pension.”
He explained that pension is a reward and recognition of workers for aging on the job and a need for a soft landing after active work years.
“The employer, government or private sector as defined by the law is mandated to make such provision. This collective social security arrangement is to attend to and fend off the burden of later life social and health challenges on aged citizens from the governments already over-burdened other responsibilities. Because of the failure, abuse and burdens of the previous Defined Benefits System, (DBS), a novel Contributory Pension Scheme (CPS) evolved based on the pension Act of 2004 and its reform of 2014.
“Without doubt, a novel idea, no matter how beautiful, will continue to be relevant by responding to the dynamics of the times. It is a kind of public-private synergy for higher efficiency and guarantees. The Nigerian system requires that employer and employee contribute agreed minimum percentages into a managed fund determined actuarially predetermined by the Act guiding pension management, for investment, security, and growth over a period.
“The longer the years of participation, the higher the accumulation, the better for investment returns and benefits size. Some present complaints on the size of the individual pension fund at retirement is because of the relatively short period the CPS has been in operation.The longer one is in participation in years of service, the larger the accumulation, the better the returns on investment on compounded basis.”
He said the third reason people think they need the lumpsum is because of lack of trust in the system.
“In many instances, they think that their money is safer being in their hands and the liberty that comes with it. In some other cases, retirees want to cover for a perceived gap or failure in their retirement plan using a huge part of their pension. This may be to build a house or some huge project. Pension is not meant for those. As much as possible, these should be carried out before the retirement age.
‘’Twenty-five per cent upfront approved by law may be agreeable to complete outstanding projects, but not 75 per cent. The future is gone if 75 per cent is taken. What is left as guarantee for the monthly income, especially when health is becoming challenged? There will be no guarantees with the ever-growing inflation with what is left. The buying power is ever decreasing, the way it is now.
“Sadly, the majority of people live a day-to-day life and plan poorly for their retirement. They delegate and relegate that important function to their employer, only to discover very late how wrong that posture has been. Very few employment places may give you that latitude of laxity. How can one leave his future and destiny in another person’s hand? Thus, people who are poorly prepared, make these agitations and concerns. It is result of poor planning and visioning. We have other people who have wondered why the pension could so much be accumulated to one industry, and still counting.
“They have their imaginations on what they could do with the money. But, because of the tight guidelines of the funds management and how tightly impenetrable it has been, some people have sworn to break the tight rein on the funds, out of possible envy. This may be possible only by law. Thus, the various ‘hacking’ attempts this far,” he added.