By Gabriel Iduh
Sir: Prior to the enactment of the Pension Reform Act 2004/2014 respectively, my former employer had a work place pension scheme. Under the scheme, employees were at liberty to opt in or opt out of the pension scheme on retirement or when they resign their appointments.
Typically, upon retirement or resignation, the employee can choose to receive his or her pension benefits as a lump sum, or in a series of steady, annuity-like payments through the course of his or her retirement.
However, since the commencement of the Pension Reform Act 2004, it appears my former employer struck a deal with Pension Commission (PenCom).
Under the new pension scheme, employees’ rights to liberty and freedom have been stripped off! Employees can no longer choose to receive their pension benefits as a lump sum, or in a series of steady, annuity like payments through the course of their retirement.
The practice now is, employees with N3million and below in their retirement saving account (RSA) receive 100% lump sum of their RSA balances on retirement or resignation irrespective of their age, service age etc. Kindly note here that the employees have no age restriction to accessing the balances of their RSA funds.
On the other hand, employees with N3million plus in their retirement saving accounts are automatically enrolled into the new pension scheme compulsorily.
Also, an employee who resigns his or her appointment before the age of 50 years would have his or her RSA funds withheld until he or she attains the age of 50 years old before he or she is entitled to a periodic sums spread throughout the length of an estimated life span.
Kindly note here that the periodic payment is not for life and there are restrictions to accessing your RSA funds.
In my humble opinion, I believe that the Pension Reform Act 2014 is in the interest and personal satisfaction of the Pension Funds Administrators and PenCom. It offends the principles of legal justice and the rule of law.
I would recommend that PenCom focus more on developmental programs and collaborate with N-SIP in capacity-building, entrepreneurship, agribusinesses etc. I will further recommend that government consider converting PenCom to the proposed Entrepreneurship Bank.
The current practices by PenCom and PFAs appears to be enslaving and perpetrates poverty, and pushes people deeper into poverty. It also undermines the public interests.
I will make a simple illustration here: Mr. A retires at 60 and has N20m as his savings. He accesses 50% of N20m which equals N10m. The balance N10m is to be spread over 180 months (15 years) and Mr. A earns N55,555 monthly for 15 years and he stops earning anything because he is expected to die at 75.
If Mr. A will be allowed to have his total sum of N20m, all things being equal, he could invest in the money market or government Treasury Bills.
Currently, the N20m fetches up to 15% on a 70 days tenor. Meaning N20m gives about N3m per annum. Divide N3m by 365 days and multiply by 30 days gives Mr. A, a monthly earning of N246,575 without depleting his capital of N20m!
Please note, this illustration implies to someone who may not want to venture into a business of his or her own.
Having worked for years, acquired vast experiences in finance, operations, manufacturing, leadership etc. and served in various capacities while in service, one can claim to be fully prepared for a bright future as against being tagged improvident with one’s hard earned funds withheld.
Here is my humble prayer to the National Assembly: The pension reform act 2014 should be repealed and re-enacted. The pensioners liberty should be extended to allowing pensioners withdraw their whole sum.
The law should also give pensioners the liberty to either withdraw their total sum or they should be able to dictate to the Pension Fund Administrators the kind of investments they want!
- Gabriel Iduh, Kaduna.
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