The Nation Newspaper

Category: Pension

  • Sell your pensions for cash in retirement, Steve Webb says

    The United Kingdom Pension’s minister Steve Webb, wants to extend freedoms announced in the Budget to give up to five million existing pensioners the chance to trade in their annuities for cash.

    Millions of retired workers would be given the power to sell their pensions, under major plans to relax annuity rules being drawn up by ministers.

    Up to five million pensioners would stand to benefit from the proposals, if they would rather have money in their bank accounts than a guaranteed income every year.

    Reforms announced in last year’s Budget will mean working people, who retire in future will be able to cash-in their pension savings for a lump sum which they will be free to spend as they wish.

    But an estimated five million pensioners, who have already retired will miss out because they are locked into their contracts until they die.

    Steve Webb, the Pensions Minister, said he wanted to change the law to enable these pensioners sell their annual lifetime incomes known as “annuities” to the highest bidder at any time after they have retired.

    Pensioners may decide they would rather have cash than a guaranteed income stream to give money to children, to pay for home renovations or to invest.

    The plan will be particularly appealing to those, who have more than one pension as a result of working for several employers, and who would prefer to have money “up front” than to receive a small amount from a low-value pension each year.

    The reform would also create a new market  in “second hand” pensions, as  insurance firms and other companies buy up individuals’ annuities, bundle them together and sell them on in bulk.

    Webb said he had been urged by pensioners to introduce the reforms, while several major pensions companies and insurers had also expressed “considerable interest and enthusiasm” for the plan.

    “I want to see people trusted with their own money wherever possible,” he said. “I have already heard from people around the country who would like to see this change made.

    “I want to see if we can get these freedoms extended to those who are receiving an annuity, but who might prefer a cash lump sum.

    “No one would be obliged to do so, but for those who would prefer upfront capital to regular income, I can see no reason why this should not be an option.”

    An estimated 400,000 people who retire each year use the money they have saved while working to buy an annuity – an insurance product which pays an annual income for the rest of their lives.

    For many people, it is the biggest financial decision they will ever make.

  • Student gets job offer for winning CHI insurance competition

    A student from the Polytechnic of Ibadan, Gbemisola Abiola, has emerge winner of the fourth edition of the Annual Consolidated Hallmark  Insurance (CHI) Essay Competition.

    Its Managing Director, Eddie Efekoha said by emerging winner, Abiola gets automatic employment with the company aside from N250, 000 cash prize.

    Efekoha said the automatic employment benefit for the first prize winner entry to work with CHI was instituted by the company to encourage and recognise talents in tertiary institutions.

    He added that apart from the essay competition being organised for students in the tertiary institutions it is also organised for staff of the company.

    He said the company believes it will also encourage research and reading culture amongst students, especially those studying insurance.

    It is increasingly generating more interest across higher institutions of learning spread across Nigeria with the likelihood of higher stakes in cash prices for the first, second, and third categories.

    He added that it will help against the backdrop of the unemployment situation in the country.

    He said the topic for assessing the winners was, “Impact of Microinsurance on Social Economic Development in Nigeria”.

    He said while they sent letters to almost all tertiary institutions in the country, they were only able to get entries from two schools as most of the schools were on strike.  The two schools were University of Lagos and the Polythecnic of Ibadan.

    Nwanya Chukwuemeka from the University of Lagos emerge second with a cash prize of N150, 000, while Opeyemi Olaniyi from the Polytechnic Ibadan emerge third to claim the cash price of N100, 000.

  • PFAs’ programmed withdrawal plan hits N228b

    The number of retirees, who chose Programmed Withdrawal plan option for pension payments after retirement under the management of Pension Fund Admistrators (PFAs),  has continued to grow as total lump sum on Programmed Withdrawal has increased to N228.09 billion from inception of the scheme to the end of the second quarter, last year, Director-General, National Pension Commission (PenCom), Chinelo Anohu-Amazu, has said.

    The PenCom boss, who made this known to reporters, disclosed that a total premium of N7.74 billion was approved for payment to insurance companies.

    She said retirees under the Programmed Withdrawal plan increased from 86,628 in the first quarter of last year to 92,373 in the second quarter, representing an increase of 6.63 per cent,

    She added that the total number of retirees in private and public sectors has shown that the public sector cumulatively accounted for 74,119 retirees while the private sector cumulatively accounted for 18,254 retirees, representing 80.24 per cent and 19.76 per cent respectively.

    She explained that retirement by Life Annuity plan in the period under review received a boost from the retirees as a result of the sensitisation programmes to create awareness embarked upon by the Commission.

    She stressed that this is evidenced by the increase in the number of retirees on annuity plan from 9,212 as at the end of the first quarter to 11,115 as at the end of the second quarter, representing an increase of 20.67 per cent.

    Based on this result, she said a total premium of N7.74 billion was approved for payment to insurance companies on behalf of the 1,903 retirees in return for an average monthly pensions amounting to N26.32 million

    She said: “In general, 89.26 per cent of the retirees were on Programmed Withdrawals while the remaining 10.74 per cent were under Life Annuity.

    “Also in the second quarter, the Commission granted the approval for the payment of N3.48 billion, being 25 per cent of Retirement Saving Account (RSA) balances to 9,549 RSA holders of which 8,685 were from the private sector and 864 from the public sector.”

    She further said that approvals were given by the Commission on Death Benefits

    “During the quarter, approvals were given for the payment of N6.12 billion as death benefits to the Next-of-Kin (NOKs) of 2,475 deceased employees. A cumulative sum of N59.12 billion had been paid to the NOKs of 22,611 deceased employees from inception to the end of the second quarter.

    “The Commission continued its sensitisation programmes and engagement of employers as part of measures to deepen compliance and implementation of the Group Life Insurance Policy,” she added.

    Programmed withdrawal refers to periodic or regular withdrawals of funds which may be on monthly, quarterly basis etc. An RSA holder upon retirement or attaining the age of  50 years whichever is later can request for the balance in his RSA to be paid out to him via programmed withdrawals. The periodic payment is not expected to be less than 50 per cent of the RSA holder’s annual terminal remuneration as at the date of retirement, provided there is sufficient balance in the RSA.

    You can also withdraw money from your Voluntary Contribution (VC) Account via programmed withdrawals. The withdrawals will, however, be subjected to Personal Income tax where it is made before the end of 5 years from the date the voluntary contribution was made.

    Annuity is a periodic payment for life from insurance company. A retired member may choose to access his retirement benefits by buying an annuity for life from a Life Insurance Company approved by the National Pension Commission. Under this option, the amount required to fund the annuity purchase will be transferred by GTB-AM Pensions from your RSA to the Insurance Company, and the Insurance Company will become responsible for making payments to the member in accordance with the terms of the Annuity Purchase.

  • Insgroup in $35m premium deal

    Pension’s Minister Steve Webb wants  to extend freedoms announced in the  Budget to give up to five million existing pensioners the chance to trade in their annuities for cash Millions of retired workers would be given the power sell their pensions, under major plans to relax annuity rules being drawn up by ministers.

    Up to five million pensioners would stand to benefit from the proposals, if they would rather have money in their bank accounts than a guaranteed income every year.

    Reforms announced in last year’s Budget will mean working people who retire in future will be able to cash-in their pension savings for a lump sum which they will be free to spend as they wish.

    But an estimated five million pensioners who have already retired will miss out because they are locked into their contracts until they die.

    Steve Webb, the Pensions Minister, told The Telegraph he wanted to change the law to enable these pensioners to sell their annual lifetime incomes known as “annuities” to the highest bidder at any time after they have retired.

    Pensioners may decide they would rather have cash than a guaranteed income stream to give money to children, to pay for home renovations or to invest.

    The plan will be particularly appealing to those who have more than one pension as a result of working for several employers, and who would prefer to have money “up front” than to receive a small amount from a low-value pension each year.

    The reform would also create a new market in “second hand” pensions, as insurance firms and other companies buy up individuals’ annuities, bundle them together and sell them on in bulk.

    Webb said he had been urged by pensioners to introduce the reforms, while several major pensions companies and insurers had also expressed “considerable interest and enthusiasm” for the plan.

    “I want to see people trusted with their own money wherever possible. I have already heard from people around the country who would like to see this change made.

    “I want to see if we can get these freedoms extended to those who are receiving an annuity but who might prefer a cash lump sum. No one would be obliged to do so, but for those who would prefer upfront capital to regular income, I can see no reason why this should not be an option”, he said.

    An estimated 400,000 people who retire each year use the money they have saved while working to buy an annuity, an insurance product which pays an annual income for the rest of their lives.

  • LASPEC chief urges workers on CPS

    SOME workers are yet to understand the Contributory Pension Scheme (CPS), Director-General, Lagos State Pension Commission, Rotimi Hussain, has said.

    He spoke during the seventh pre-retirement seminar for the civil servants and other employees of the State Universal Basic Education Board (SUBEB), Teacher’s Establishment & Pensions Office (TEPO), Government Parastatals and Local Government staff, who are retiring from the state Public Service between January and June, this year.

    According to him, the seminar is aimed at  preparing the government’s employees on the workability of the CPS.

    He said LASPEC organises the seminar on with the state-approved Pension Fund Administrators (PFAs) and insurance firms.

    He stressed that workers should have the right knowledge to guide them into retirement.

    He said: “The state was mindful of the fact that the rudiments of the scheme had yet to be fully understood by many workers which necessitated the need for understanding in the scheme.

    “The pre-retirement seminar is aimed at assisting prospective retirees to adequately prepare for physical, emotional and financial well-being in retirement as well as afford them the benefit of being in a better position and frame of mind to build a comfortable and rewarding life in retirement.

    “Participants will, among other things, be exposed to the procedures for processing of their end of service benefits; how to monitor and ensure that their Retirement Savings Account is consistent with their 7.5 per cent statutory monthly deductions and the 7.5 per cent counterpart contributions by the employer, and also highlight the two exitoptions of the programmed withdrawal provided by the PFAs and the annuity for life provided by the insurance companies.”

    Executive Director, Technical, Mrs. Folashade Onanuga, explained that the Lagos State Pension Reform Law 2007 allows a retiree to choose from two options for his monthly pension. These are the withdrawal module of the PFAs or Life Annuity from a licensed life insurance firm.

    “Life annuity is a regular income payment (monthly or quarterly) made to a person (retiree) for the rest of his life, in return for payment of the purchase money (lump sum premium). It is provided by the insurance companies and would be paid for life with the pension guaranteed for 10 years.’’

    On the programmed withdrawal, she said it is a product of the PFAs. She said its computation is based on the template given by the National Pension Commission (PenCom), adding that the higher the lump sum, the lower the monthly pension in the programme.

    “It is a periodic (monthly or quarterly) pension payment to a retiree from the balance in his retirement savings account for an estimated guaranteed pension period or life span. PFAs owed the retirees the duty to enlighten and agree with them on the preferred withdrawal option.

    She said the process entails PFA to provide current total RSA balance, amount for lump sum and other necessary data for the purpose of generating annuity quote

    “Retiree should provide life insurance Company chosen with RSA balance less amount for lump sum and collect the quotation or provisional agreement from Life Insurance Company and submit same to his PFA as soon as possible.

    “PFA shall within seven days of receipt of application seek approval from PenCom to pay lump sum and release annuity premium. PenCom will send approval to PFA and copy Pension Fund Custodian (PFC) and the National Insurance Commission (NAICOM).

    “PFA will pay the lump sum of the retiree and transfer balance to Life Insurance Company. Life Insurance Company will issue the policy document of the retiree. Payment of monthly pension is made by standing order to the bank account of the retiree,” she said.

  • 11 PFAs exceed investment limits, others

    Eleven Pension Fund Administrators  (PFAs) overshot their investment limits in the second quarter of last year, the National Pension Commission (PenCom) has said.

    It said Section 7 of the Pension Reform Act 2014 on ‘Regulations on Investment of Pension Fund Assets’ stipulates that not more than 10 per cent of the total pension assets under management shall be invested in all instruments/securities, which include equity, money market and debt issued by a corporate entity.

    It said: “PFAs shall ensure that not more than 45 per cent of pension assets under its management are directly or indirectly invested in any one sector of the economy.’’

    PenCom’s Director-General, Mrs Chinelo Anohu-Amazu, said in its Second Quarter Report made available to journalists that during a routine examination of 11 PFAs in the period under review,  the PFAs were found guilty of delays in the payment of retirement benefits; receipt of pension contributions without appropriate schedules; unresolved customer complaints; failure to fill certain vacant management positions; and non-implementation of disaster recovery plans.

    She said the examination, which was risk-based, covered 11 areas of the PFAs’ operations.They included company, board and management operations; information and communication technology; pension administration; benefits administration and payment arrangements; and fund management.

    She said: “Other areas included risk management and compliance, service delivery as well as internal control systems.The draft report of the routine examination had since been communicated to the boards of some of the PFAs.

    “The examination report had since been discussed with concerned PFAs’ management and commitments were obtained for remedial actions to be carried out by the operators examined.”

    The PenCom chief added that evaluation of risk management reports forwarded by the operators showed that some operators faced operational risks associated with receipt of contributions without appropriate schedules. She said they also faced litigations, concentration of portfolio investment, and non-funding of RSAs by employers, adding that the affected operators were advised by the Commission to strengthen their mitigating measures to avert the identified risks.

    She further said the Commission received and reviewed the actuarial valuation reports of 10 Defined Benefit Schemes for the year ended 31 December, 2013.

    “The reports revealed that some of the schemes had some funding gaps as at the end of the reporting period.

     

    Consequently, the affected scheme sponsors were directed to come up with funding arrangements with a view to clear the identified shortfalls.

    “During the quarter, the Commission received and reviewed 28 corporate governance reports from licensed operators. The reports indicated some violations of the Code of Corporate Governance by the operators.

    “The review further showed that some operators did not evaluate the performance of their Boards, Board Committees and Directors; and did not hold inadequate number of Board meetings as stipulated by the Code.

    “In addition, some Board members did not attend Board and Committee meetings regularly. Subsequently, the affected operators were asked to address the issues of non-compliance with the Code of Corporate Governance.

    On the Returns Rendition System of the operators, Mrs Anohu-Amazu said 30 operators rendered returns on the funds under their management and their company accounts to the Commission through the Pension Returns Rendition System (PenRRS).

    “The Commission scaled up its compliance and enforcement strategies to enhance compliance with the provisions of the Pension Reform Act (PRA) 2004. Consequently, sanctions were applied in line with the Compliance Framework.

    “In addition, the Commission had participated in public enlightenment programmes as well as collaborated with various stakeholders to enhance compliance,” she added.

  • Lagos to implement 18% pension increment

    Lagos to implement 18% pension increment

    Lagos State Government has assured its workers that it will soon implement the increment in monthly contributions of both employers and employees from 15 per cent to 18 per cent.

    The Pension Reform Act 2014 mandates employers under the Contributory Pension Scheme (CPS) to contribute 10 per cent of emoluments monthly while employees contribute eight per cent.

    Director-General, Lagos State Pension Commission (LASPEC), Rotimi Adekunle Hussain, spoke at  the 15th Bond presentation.

    He said the Commission paid  243 retirees N1.54 billion before the  CPS took off the state in 2007.

    He said so far, the government had paid into the Retirement Savings Accounts (RSA) of 5, 773 retirees under the CPS a total N30.48 billion.

    On the increment, Hussein explained that LASPEC was studying the new law to propose some amendments to the Lagos State Pension Reform Law 2007.

    He said this would be sent to the state House of Assembly.

    To further underscore the  government’s commitment to the scheme, he said the monthly deduction of 7.5 per cent from the salary of every employee and the counterpart 7.5 per cent contribution by the state government had been  paid.

    He said: “The joint contribution  has grown to the tune of N55.58 billion. It is thus a thing of joy that the present administration is leaving behind a legacy worthy of emulation by subsequent administrations in the state.

    “In a clear departure from what obtained in the old scheme, the beneficiaries are enjoying their retirement benefits under the CPS without any rancour or stress. The feedback we get regularly about the well-being of our retirees show that they are enjoying their retirement peacefully as all the Pension Fund Administrators (PFAs) and insurance companies usually remit pension entitlements into their respective accounts at least by the 25th day of each month.’’

    He continued: “The CPS, which is being operated at both federal and state levels, is aimed at righting the wrongs associated with the Pay-As-You-Go Scheme. It is interesting that for the past 10 years of the existence of the new scheme, there has not been any case of fraud, embezzlement or misappropriation of funds. The Pension Reform Act 2004 which was recently amended with the Pension Reform Act 2014 comes along with a lot of improved benefits for workers and assurances of better future in retirement.”

    Hussain urged its workers and residents of voting age to vote for the right candidate at the next general election.

    He noted that the state has continued to be the leading light not only in the administration of pension benefits but in good and credible governance.

  • Steve Webb threatens law to end pension’s rip-off

    Steve Webb threatens law to end pension’s rip-off

    Steve Webb, the Pensions Minister, has told The Telegraph he  is ready to change the law to force pension firms to end rip-off fees if they fail to scrap “jaw dropping” charges of up to three per cent  yearly.

    Pensions companies have been told they must draw up urgent plans to end “jaw dropping” charges to more than a million customers, after a major report found £26 billion worth of savings is at risk from rip-off fees.

    Webb, the Pensions Minister, said he was ready to change the law to stamp out high charges if companies responsible fail to take action as he was not prepared to wait for them to give customers a better deal.

    He will be calling representatives from the major pension companies to urgent talks in the New Year in an attempt to reach a voluntary solution.

    But firms that refuse to end the charges will be named and shamed and will face new laws to protect customers’ retirement savings from the “shocking” fees, he warned.

  • Japan pension fund enters new era

    When Takahiro Mitani’s term as head of the world’s largest retirement fund finishes in March, so too will the old era of Japanese pension management.

    The former Bank of Japan official saw his power ebb during a five-year reign at the $1.1 trillion Government Pension Investment Fund, as Prime Minister Shinzo Abe took office with the goal of overcoming deflation. Mitani, 65, will be the last person to wield sole control of a bond-heavy GPIF after the biggest overhaul in the fund’s history.

    Abe, 60, has reshaped government by putting his own people in positions of power at institutions across the nation. Mitani, who watched Masaaki Shirakawa get replaced at the BOJ and proponents of Abenomics surround him at the fund, acquiesced to the new order after months of resistance. The GPIF he leaves has less reliance on domestic debt, a broader asset mix and plans to revamp governance.

    “The wind has blown in a certain direction, and Mr. Mitani belongs to an era that has probably passed,” Jonathan Allum, a London-based strategist at SMBC Nikko Capital Markets Ltd., said by phone Dec. 10. “His background is at the BOJ, from an earlier period of its history,” he said “It was time to change.”

    Mitani became the public face of that shift at an Oct. 31 press conference. As cameras rolled and flashed in a rented conference room in Tokyo’s Roppongi area, he bowed, introduced himself, and spoke into seven microphones. Finally, Japan is heading for “appropriate inflation,” he said, explaining why the fund would put half its assets into equities and slash local debt to 35 percent of holdings from 60 percent.

    Govt Push

    Mitani took over GPIF in 2010 with no experience in the asset management industry, a staff of about 70 people and a pay packet worth 17.46 million yen ($145,330) for his first year. With prices in Japan decreasing for more than a decade, holding 68 percent of assets in local debt fit with the pledge he made to gain the public’s trust through safe and efficient investment.

    That changed soon after Abe came to power. In April 2013, Haruhiko Kuroda announced record stimulus just weeks after Abe put him in charge of the central bank. Stocks soared, the yen slumped and in May consumer prices stopped falling.

    By November, the BOJ’s preferred measure of inflation was climbing at an annual pace of 1.2 percent. Mitani faced a public attack on his investment strategy, with a report commissioned by Abe painting a picture of a badly run fund that was out of step with the times.

    •Culled from Bloomberg

  • CPS contributors hit 6.196m

    CPS contributors hit 6.196m

    Contributors under the Contributory Pension Scheme (CPS) increased from 6,090,301 in the first quarter of 2013 to 6,196,956 in the second quarter of last year,National  Pension Commission (PenCom) has said.

    This is an increase of 1.75 percent.

    In a survey, it said at the end of the second quarter, the total value of pension assets stood at N4.49 trillion from N4.2 trillion recorded in the first quarter, an increase of N281.5 billion or 6.69 percent.

    The increase in scheme memberships, according to the statistics, was  explained by Retirement Saving Account (RSA) holders; it accounted for a proportional contribution of 98.94 percent of total pension scheme memberships during the second quarter.

    Approved Existing Schemes (AES) and Closed Pension Fund Administrators (CPFA) accounted for the balances of 0.66 and 0.40 percent. The total memberships of CPFA and AES were 24,622 and 44,351.

    Analysis of total RSA registrations for both public and private sectors shows that total RSA registrations increased by 1.77 percent from 6,024,599 in the first quarter. The private sector recorded highest number of RSA registrations at 3,121,262, accounting for 50.91 percent of registrations.

    The public sector also witnessed an increase in RSA membership as registrations marginally increased from 2,994,562 in the first quarter to 3,010,106, representing an increase of 0.52 percent.

    In all, the public sector accounted for 49.09 percent of total RSA registrations at the end of the quarter under review.

    Analysis of the age distribution of RSA holders shows that RSA holders  ranging from 30 to 39 accounted for the highest proportion of registrations in the second quarter at 39.39 percent. The age category 49 and below accounted for 77.96 percent of RSA contributors.

    The report further showed RSA registrations by Pension Fund Administrators (PFAs) market share. It showed that PenCom categorised performance of PFAs into top three, five and  10 PFAs; there are also bottom three, five and 10.

     The ranking of PFAs by some registered contributors shows increases in the shares of the top three, five and 10 PFAs as the shares increased from 45.44, 62.39 and 87.30 percent in the second quarter to 46.68, 63.78 and 87.77 percent.

    However, while the share of the bottom three and five PFAs decreased marginally by 0.01 percent, those of bottom 10 PFAs decreased by 0.47 per cent.

    A review of the range of market share of RSA registrations by some PFAs shows that 75 percent of the PFAs have less than 500,000 RSAs in their portfolio.

    Four PFAs had between 500,000 and one million RSAs under them. One PFA, however, has over one million RSAs under it.

    The ranking of PFAs by total contributions shows that the top three PFAs accounted for 47 percent of contributions. Similarly, the top five PFAs accounted for 62.77 percent of all contributions received in the same period.

    The analysis further shows that while the bottom three PFAs accounted for 0.26 percent of all contributions, the bottom five PFAs accounted for 1.20 percent of total contributions.

    Similarly, a review of PFAs’ rank by size of RSA assets shows that the top three, five, and 10 PFAs accounted for 45.37, 62.23 and 87.07 percent of total RSA assets.

    The bottom five and 10 PFAs, showed some improvements in the proportional share of pension assets under their management as the share for the bottom five PFAs increased by 2.18 percent, while that of the bottom 10 increased to 12.93 percent.