The Nation Newspaper

Tag: pension

  • ‘New pension scheme is infallible’

    It would be difficult for the new pension scheme to fail, the Chairman of Pension Fund Operators Association of Nigeria (PenOp) Mr. Misbau Yola, has said.

    He said it would take the collusion of the regulatory body, the National Pension Commission (NAICOM), Pension Fund Administrators (PFAs), Closed Pension Fund Administrators (CPFA) and the Pension Fund Custodian (PFCs) for the new pension scheme to fail.

    Yola, who spoke in Lagos, said it would be impossible for one or all the players to conspire and manipulate the system, adding that the regulation and operation of the pension industry makes the new scheme infallible, as against the old scheme.

    He said: “It is impossible for the new scheme to fail going by the way it is structured. The role of PenCom, PFAs, PFCs and the contributors, the Retirement Savings Account (RSA) are distinct. The structure of the new scheme is such that employers and employees are required to make monthly funded contributions throughout the working life of the employee towards the employee’s retirement benefits.

    “The Act establishes PenCom as the single body responsible for the regulation of the pension industry in Nigeria with a cardinal objective to regulate, supervise and ensure the effective administration of pension matters in Nigeria.

    “The PFA’s/CPFAs are the key operators under the scheme and as such, are responsible for the administration and management of pension funds under the Act. They deal directly with the contributors or Retirement Savings Account (RSA) holders and their beneficiaries on continuous basis.

    “They are also responsible for opening RSAs for all customers, and are to issue them with PenCom’s personal Identification Number (PIN), invest and manage pension funds and assets, mantain books of accounts of all transactions relating to pension fund under its management, provide customer service support to employees, including access to RSA information and account statements on the demand and calculate and pay retirement benefits.

    He explained that the PFCs on their part are subsidiaries of licensed financial institutions responsible for the custody and safe keeping of pension assets. They are to notify the PFA’s within 24 hours of the receipt of the contributions, settle transactions on behalf of the PFAs and collect dividends and other income accruing to the fund on the PFA’s behalf. They would also report to PenCom on all matters relating to the pension fund, he added.

    Yola said these distinct roles by all players in the pension industry makes it difficult for any one player or all players to manipulate.

    Speaking on the rationale for pension reform in the country, Yola said most schemes in the past in the private and public sector, were either under-funded or unfunded, and unsustainable.

    He recalled that there were unsustainable outstanding pension liabilities, especially in the public sector. It was also characterised by weak and inefficient administration of pension schemes while most private sector employees were not covered by any form of retirement benefits.

    The Acting Director-General of the Commission, Mrs. Chinelo Anohu-Amazu said the cardinal principle of separation of custody of funds from management and supervision has resulted in a pension scheme with sound internal mechanism for the transparency and accountability.

    She said whereas the PFAs manage the funds, they do not have access to same as custody is vested in the PFCs and the Commission ensures both parties adhere strictly to regulations governing the funds.

    This ring fencing of pension fund asset and regulatory non-interferencehas resulted in the consistent growth in a large pool of pension Assets of N3.8 trillion which are invested in structured and safe financial instruments, she said.

     

  • ‘Cap on pension management fees too high’

    ‘Cap on pension management fees too high’

    A leading pensions’ provider has said a proposed cap on management fees is “too high.”

    Legal and General said a 0.75 percent cap on fees should be brought down to 0.5 per cent. It claims that the 0.5 per cent cap could cost consumers £4 billion over a lifetime of pensions saving.

    However, experts said if caps are set too low, the government risks “dumbing down” pensions and stifling innovation in the sector.

    The criticism comes on the same day the deadline for submissions by the pensions industry to the government.

    Legal and General appears to be out of line with the rest of the industry, who are against any cap on fees.

    Ministers argue the industry could be charging excessive amounts and want to curb management fees, however Steve Webb, the pensions minister, said pension providers could charge above the cap if they can prove to the regulator that the fees offer value for money.

    Mr Webb told BBC Radio Four’s Today programme that the aim of the cap was to get rid of extremely high charges but also to avoid driving charges so low that people can’t get a quality product.

    He said: “One option will be to say you have a cap that’s quite tough, and then you say if a particular provider wants to go above that, they have to explain to the regulator that people are getting value for money.”

    He added: “If we come up with a cap, it will be an absolute cap; it will be a legal limit. One option for example would be to set a cap at a level now and then perhaps glide it down over a number of years so that the industry year after year has to get more and more efficient.”

    Dr. Ros Altman, a pensions expert who has advised the government, warned against capping the fees so low that you “dumb down” pensions to the “lowest common denominator” and that very low fees could limit “innovation” in the sector.

    “We have to be careful not to get too obsessed with the level of charges and we have ad a lot of success in bringing down the charges on pensions across the industry.

    “Of course it’s better if you can pay less charge because more of the money stays in your pension fund.

    “We don’t equally want to dumb down pensions to the lowest common denominator; Legal and General are already offering pensions at around 0.5 per cent, so of course, from their perspective, recommending that everyone else should do the same makes business sense.

    • Culled from The Telegraph

  • PFAs, life insurers bicker over retirees pension option

    PFAs, life insurers bicker over retirees pension option

    THE end may not be in sight yet to the furore between Pension Fund Administrators (PFAs) and insurance operators over de-marketing of the two retirement options available to retirees for drawing pension benefits.

    The products, which are under the Contributory Pension Scheme as contained in the Pension Reform Act (PRA) 2004, are Programme Withdrawal offered by the PFAs and Life Annuity by life insurance firms.

    Investigations reveal that the crisis between the PFAs and life insurers over which product a retiree should choose have continued to grow as they trade blame on de-marketing while employers are getting worried following feedbacks from their retirees.

    The life insurers believe PFAs have advantage over them as the fund is under their control and they do everything possible to make sure they keep the money and keep them away from the retirees.They alleged that PFAs also de-market annuity and force retirees to choose Programme Withdrawal in its stead.

    The PFAs have, however, denied the allegation, saying insurers are getting agitated unnecessarily.

    The PRA provides that an employee can, on retirement, make withdrawals from his Retirement Savings Account (RSA) in the form of a programmed monthly or quarterly withdrawal based on his life expectancy or buy life annuity from a life insurance company.

    The section says; “A worker with a RSA can access the money upon retirement or at 50, by opting for programmed withdrawal, which is provided by the PFAs, or annuity, which is provided by the insurance companies.”

    According to the Act, programmed withdrawal is an option that is calculated on an expected life span; meaning that the pensioner will be paid regularly for some years after which he ceases to earn income from his PFA.

    Also, the Act specifies that the annuity will be paid on a regularly by the insurance firm to the pensioner until he dies.

    Section 1.2.9 of Regulation on Administration of Retirement Terminal Benefits issued by the PenCom provides that a PFA shall not impose, coerce or influence a retiree on the choice or mode of withdrawal.

    However, regulation on annuity under Section 4.1 b of the PRA is jointly issued by National Insurance Commission (NA1COM) and the National Pension Commission (PenCom) for giving effect to the provisions of the PRA.

    According to laws on annuity, it is the responsibility of NAICOM to regulate the annuity market while it is that of PenCom to ensure that a retiree receives his/her retirement benefit promptly.

    Meanwhile, some employers have told The Nation that it has received complaints from its retirees and insurers, seeking help from them on how they could assist in making PFAs to release funds of retirees who have chosen life annuity.

    They said they have observed the rift and are worried.

    An employer said it got reports that some PFAs refused to release funds of some its retirees to life insurers after all processes have been completed.

    He explained that they, on their part issue retirement bond to retirees immediately after retirement.

    “We got a complaint from an insurance company that a particular PFA has refused to transfer a retiree’s pension fund who opted for annuity.

    “They asked for our assistance, but we told them that there is nothing we can do on our part and directed them to the regulatory authority,” the employer said.

    A retiree in the private sector said the PFA and insurers need to be matured in the way they market the products, adding that he was more confused after listening to both parties on which product to choose.

    A senior official in PenCom said the problem is an issue of mis-selling of the two products by the two parties.

    He said it was baseless for a PFA to think because he had kept the fund to a level where the employee retires, the fund must remain with them.

    He affirmed that there are excesses between the two, noting that the Commission has told them there is no need for quarelling.

    He said they expected the PFAs and insurers to be courteous in marketing the products, adding that PenCom and NAICOM have intensified efforts to ensure the laws governing the regulation on annuity as jointly issued is not disregarded.

    He said: “Whatever the PFA and insurer does in marketing the products, the decision is made by the account holder who has a right to choose what he or she would prefer as its pension options.

    “We have collaborated with NAICOM to curtail the excesses of the two. We have also embarked on enlightening and creating awareness among retirees on their rights as account holders. We told the retirees to always report to us when they feel something is not right.

    ”The issue is not for them to be at war with each other, but to sell their products without running down the other”

    Chairman, Pension Fund Operators Association of Nigeria (PenOp), Mr. Misbahu Umar Yola, said he does not believe the PFAs are deliberately holding on to pension funds of retirees who opt for annuity.

    He further said he does not think it is an issue of de-marketing annuity products as all they do is explain to retirees the advantages and disadvantages of the products.

    According to him, there may be a few bad eggs, but it is not peculiar to most PFAs in the industry.

    He said: “I do not think any PFA will compel retirees to purchase programme withdrawal or deliberately hold their fund back. Sometimes there could be delay between the period when the PFA writes to PenCom for approval to release the fund and this does not take more than two weeks.

    “There could be an incident, but this does not make it an industry problem. There are 20 PFAs and we receive thousands of applications and it is possible there could be certain issues with few of them that need to be addressed by either the retiree or the PFA before transfer of fund can be done.”

    Vice Chairman, Nigeria Insurers Association (NIA) and Managing Director, Linkage Assurance, Mr. Gus Wiggle, said there was no basis for PFA not to release a retiree’s fund to insurers.

    He added that the choice of the pensioner should be respected by the PFA.

    “I believe PenCom is doing a good job and they will come down hard on any PFA found to disregard the law. The PFA job terminates when the employee retires and their choice in choosing a retirement option should be respected,” he said.

  • Pension fund: Employers risk sanctions if they default

    Employers default-ing on remitting their employees’ pension pool should get ready to start facing sanctions. This point was reiterated by Umaru Modibbo, the Managing Director and Chief Executive Officer of Sigma Pensions, in Lagos, recently.

    Speaking exclusively with The Nation Modibbo said the pension fund administrators is that of compliance by employers.

    “Under the law, the Reform Act says you should remit it (pension) seven days after the last pay day,” he said. “But if you don’t do that, you’re bound to pay interest rate of whatever amount you withhold. In fact the National Pension Commission has started appointing companies to go after these defaulting employers and get them to pay. And they have started paying. Some law firms and accounting companies were appointed by National Pensions Commission to pursue these defaulting employers and get them to pay together with the interest to the organisation.”

    Quelling fears of contributors about the safety of their pensions in the light of recent financial scams, Modibbo urged employees to have faith in the pension scheme. “We have N3.5trn in the past eight years and there is no single fraud because of the segregation of duty,” he said.” “The pension administrator is just administering this fund while the custodian is in custody of these funds. And these custodians are the big three or four banks in the country. We all know them.”

    Modibbo also decried the low number of registration of workers in the country, considering the working population. “We are possibly like 45 million by our estimates,” he said. “Only about five million are registered out of an estimated working population of 45 million. So, where is the 40 million?”

    Reacting to the a cry that some employers did not remit funds to the pension pool, Modibbo said that workers affected in such companies must squeal to PENCOMM.

    In a related development, at a public forum, Abdulrahman Saleem, who represented Mrs. Chinelo Anohu-Amazu, the Acting Director-General of the National Pension Commission Board said though the pension scheme has experienced some challenges, “it has eliminated queues of old pensioners. Now you can seat here and they (PFAs) come to you six months before retirement.”

    The high point of the event was when the head of benefit administration, Mallam Ibrahim Balarabe took would-be pensioners on a slide presentation tagged ‘How to access your retirement benefits.’

    Balarabe enlightened the audience which included retires and prospective retirees on the step by step processes and requirements needed to be able to access their retirement benefits.

  • Tax cut offers workers £11,000 pension boost

    Tax cut offers workers £11,000 pension boost

    A tax cut for City fund managers will leave the typical worker £11,000 better off on retirement, the Treasury has said.

    Treasury minister, Sajid Javid, told MPs that the impact of the tax cut has now been independently assessed by the Government Actuary’s Department

    The Treasury has promised to abolish “Schedule 19” stamp duty reserve tax, which applies to some investments sold by funds.

    The tax cut, worth £145 million a year to the fund management industry, is politically controversial and Labour has promised to reverse it.

    SajidJavid, a Treasury minister, told MPs that the impact of the tax cut has been independently assessed by the Government Actuary’s Department.

    The actuaries calculated that a typical 22-year-old currently earning the average weekly wage and investing the equivalent of 10 per cent of their earnings in a pension over their career “would see a fund value £11,200 greater at retirement as a result of these changes,” he said.

    This is equivalent to approximately a 1.3 per cent increase that worker’s total fund at retirement, Mr Javid said.

    Ed Miliband, the Labour leader, in September suggested that Labour would reinstate the tax, describing the Coalition move as a “tax cut on hedge funds”.

    Labour has said it would use the money raised to reverse Coalition cuts in housing benefit for people with spare rooms in social housing, dubbed the “bedroom tax” by critics.

    Mr Javid said the actuaries’ figures showed that the tax cut was in Britian’s best interests and should not be reversed.

    “Abolishing Schedule 19 will make UK based funds more competitive, create jobs and improve returns for investors. The government reforms will also mean that ordinary savers could be over £11,000 better off when they retire,” he said.

    “Schedule 19 is a major deterrent to foreign investment funds moving to the UK. Labour’s plans to reinstate the tax would rule out real benefits for hardworking families and could cost thousands of jobs across the UK.”

    Separately David Gauke, a treasury minister, has said that that the tax cut would boost employment, arguing that asset management funds would flock to the UK to set up businesses.

    In a response to a written question in the Commons’ Mr Gauke said that the asset management industry already directly employed 32,300 people in the UK.

    Edinburgh, he said, has 3,300 people employed in the industry, Coventry 1,200. A further 900 people work for asset managers in Reigate and 500 in Liverpool.

    He said that there were “tens of thousands” more people whose jobs are indirectly reliant on the sector.

    He said: “Many of these jobs are created by funds which are set up in the UK. The abolition of this tax will encourage more funds to be set up here, thereby safeguarding existing jobs and equipping the UK to compete more effectively in the global race for growth.”

    Daniel Godfrey, head of the Investment Management Association, said that the changes would put the UK on a more even footing with other European countries such as Luxembourg and Dublin. He added that it was a world class opportunity.

    • Culled from The Telegraph

  • Pension business’ll soar, says IGI Pension boss

    Pension business’ll soar, says IGI Pension boss

    The industry will boom when the regulatory body, the National Pension Commission (PenCom) releases the guidelines on the informal sector under the Contributory Pension Scheme (CPS), the Managing Director of IGI Pension Managers, Stanis Ezeobihas has said.

    Ezeobi said according to statistics, there are about 51 million working people in Nigeria with only 5.6 million registered in the CPS.

    He said that despite the N3.73 trillion pension funds generated through the contribution of the 5.6 million people, about 45 million people were yet to register, showing that a huge market still exists in the industry.

    He said: ”The market frontier is the informal market going by available statistics, although there are challenges and costs that go with getting the informal sector on board. It is more expensive to cover than the formal sector.

    “The informal sector consists of artisans, Okada association, Drivers Union and market women associations among others and reaching these people can be difficult,” he said.

    Ezeobi said to reach and register these groups of people, pension managers have to come together with a common goal to achieve results.

    He said for IGI Pension, the company is repositioning to key-into the prospects of the sector, adding that it has recapitalised to over N1.2 billion, more than the N1 billion recapitalisation required by the regulatory body.

    “On our own part, we are strategising at using the parent company, IGI Insurance Plc platform which has a broad agency network to penetrate the informal sector and get a significant share of the market.

    “We are the last to be licensed by PenCom since the new scheme began, but we have been able to grow and surmount all of our challenges. What we are waiting for now is for PenCom to release the guideline on the informal sector,” he said.

    The Acting Director-General of (PenCom), Mrs. ChineloAnohu-Amazu said the framework on informal sector participation is been put in place by the commission, noting that the market is huge and untapped.

    She stated the policy issues such as contribution rate, mode of collection and enforcement have been addressed by the framework. She, however, noted that the informal sector and self-employed persons lack a coherent structure and have an unwieldy composition, which renders their integration into the new scheme a difficult task.

    She added that compliance among the small sized private sector employers is challenging in the implementation of the CPS as they see CPS as additional cost to their operations.

     

  • CPS: Pencom generates N3.73tr

    CPS: Pencom generates N3.73tr

    NATIONAL Pension Commission’s (PenCom) N3.73 trillion assets generated under the Contributory Pension Scheme (CPS) and registration of over 5.8 million members have deepened the financial sector, its Acting Director-General, Mrs Chinelo Anohu-Amazu has said.

    Mrs Anohu-Amazu, who spoke while showcasing the success of the CPS introduced in 2004 to delegates from 40 countries at the World Pension Summit in Amsterdam, Netherlands, said the assets have grown from a deficit of N2.6 trillion prior to its inception in 2004 to N3.73 trillion in the nine years of the existence of the Scheme.

    She told the delegates that the CPS is sustainable, funded and privately managed by operators licensed by PenCom, adding that the legal and institutional frameworks established by the Commission which are responsible for the success so far recorded, have also provided a platform for the provision of infrastructure and the development of the real sector, thereby reinforcing the transformation agenda of President Goodluck Ebele Jonathan.

    The World Pension Summit is a yearly event dedicated to on-going advanced learning for senior pension professionals. It also offers comparative analysis of pension experiences in participating countries, as well as provide insight into the impact of emerging trends on pension arrangements and ample room for peer-to-peer discussion among delegates.

    It brought together over 350 professionals, experts and key authorities in the field of retirement solutions management with specific focus on pension fund strategies, social security and employee benefits.

    The theme of the summit centered on pension investment, risk management, pillars for pension scheme administration, communication and information management and strategies for stimulating growth in pension portfolios.

    The Acting DG led a delegation comprising Mrs. Grace Usoro, the General Manager/Head Public Sector Pensions Department and Ms. Olusola Odufuwa, Head Corporate Counselling Unit of the PenCom.

    Other speakers included Prof Zhen Li, Director of the Institute for Social Security Study, School of Public Administration, China Renmin University; Yves Leterme, Deputy Secretary-General of the OECD, Paris, William De Vijlder, Vice – Chairman of BNP Paribas Investment Partners, Brussels.

    Others were Gerard Riemen, Managing Director, Federation of the Dutch Pension Funds, the Hague, Gareth Gibbins, Steve Webb, Minister of State for Pensions, United Kingdom, Elsa Fornero, former Minister of Labour, Social Policies and Equal Opportunities, Italy, Nancy Heller, Senior Managing Director, Globalisation, TIAA-CREF of the United States and AnnamariaLusardi, Academic Director, Global Financial Literacy Excellence Centre.

  • Lloyds union prepares strike ballot over cuts to final salary pensions

    Union chiefs warn proposals for a new cap on the defined benefit savings pots of 35,000 employees is the ‘last straw’

    Union chiefs accused Lloyds Bank of mounting a “relentless attack” on staff benefits as workers threatened to strike over the loss of final salary pension perks.

    Some 35,000 employees, a third of the workforce, have been told their pensionable pay will be frozen by Lloyds under changes to its terms and conditions. No more inflationary increases will be made.

    The final salary pension plans were closed to new members in 2000. But union chiefs claim thousands of other staff who have joined in the past decade now fear Lloyds may also make cuts to their terms and conditions.

    Ged Nichols, general secretary of Accord, said it was “particularly difficult” for staff to accept given the bank’s fortunes are recovering and “executives are reaping the benefits of this through share options”. Antonio Horta Osorio, Lloyds chief executive, is due to pick up three million shares in a mater of days.

    Mr Nichols said a scrutineer was being appointed ahead of a strike ballot which could trigger a damaging walkout by staff over Christmas and the New Year. The majority of the 35,000 are thought to be women employees in branches.

    In a letter to Nick Fisk, Lloyds’ head of employee relations, Mr Nichols said: “Members have been hugely critical of the bank with many saying that they have lost trust and confidence in the organisation. Some have described this latest attack on their benefits as the last straw.”

    He added: “Members who are not fortunate enough to be in the defined benefit [final salary] scheme are also worried because, if the bank can break its promises to its longest serving and loyal employees about their pensions, then what is safe in terms of condition of employment and other benefits?

    “Others have noted that staff who are transferring to TSB are being offered compensation for the loss of their future pension benefits but no such compensation is being offered to those who will be staying with the Lloyds Banking Group.”

    Lloyds swallowed crisis torn Halifax Bank of Scotland (HBOS) at the height of the financial crisis. Accord represents the bulk of these workers. Staff in the final salary pension had been receiving yearly increases in pensionable pay of two per cent, under a former cap.

    The cap will now be set at zero.

    Lloyds said it had to ensure “pension benefits are more balanced across the group”. It added: “The group is also conscious of its obligations to ensure the viability of the schemes and its ability to meet its obligations over the long term.”

     

     

  • IBTC Pension pays N178b to 29,000 retirees

    IBTC Pension pays N178b to 29,000 retirees

    Stanbic IBTC Pension Managers Limited has said it paid over N178 billion to over 29, 000 retirees across the country under the Contributory Pension Scheme (CPS) since the commencement of its operations eight years. About N1.7 billion was paid monthly.

    The pension manager said it has over one million Retirement Savings Account (RSA) holders and assets under management of over N950 billion.

    Chief Executive of Stanbic IBTC Pension Managers Limited, Dr. Demola Sogunle made thisknown while speaking at the inaugural seminar on pre-retirement organised by Stanbic IBTC Pension Managers Limited, a member of Stanbic IBTC Holdings, in Lagos.

    Sogunle emphasised the need for retirees to commence early retirement plan during their working life as it takes many years to accumulate the necessary funds with which to live comfortably when salary eventually ceases.

    According to him, people are generally apprehensive about retirement because they do not plan for it early enough.

    He said: “Ideally, one should start planning for retirement from the day one takes on a first job. It demands setting aside part of current income into a retirement savings account (RSA).”

    According to him, the fledgling pension system in the country, with defined contributions as its foundation as enshrined in the Pensions Reform Act of 2004, charts a clear path for employees to maintain a stable standard of living after retirement. He stated that the seminar provided a platform for the firm to forge closer ties with its customers and to enlighten the public on developments in the pension industry.

    Sogunle said as a service provider of repute and trust, the PFA will continuously offer innovative customer value propositions, part of which include creating awareness about the benefits of retirement savings and helping workers plan for that retirement.

    He said: “The seminar, besides celebrating retirees who will soon become retired clients of Stanbic IBTC Pension Managers, will also provide an opportunity to address the concerns or anxieties they might have as retirement draws close. Among issues examined by seasoned professionals are preparation for retirement; how to access retirement benefits; health at retirement and investment opportunities for post-retirement.”

    The Stanbic IBTC Pension Managers boss said the company is backed by the requisite expertise, experience with strong and sound financial clout of the Standard Bank Group, ensuring efficiency in the management and safety of clients’ investments.

    He said: “We believe the support, experience and capabilities of the Standard Bank Group, to which Stanbic IBTC Pension Managers Limited belongs, have been instrumental in enhancing our expertise, resource base and general service delivery; thus reinforcing our goal of providing excellent service to all our customers.

    “Our aim is to continue to set higher standards of service delivery and ensure that our retirement savings account holders derive maximum value from their contributions.”

    Sogunle added that the company was set up with a mission to enable Nigerians retire to a life of relative comfort and peace after their working lives, noting that they want to help people plan for their retirement to ensure that the retirement phase is as rewarding and productive for them as possible.

    He outlined three crucial considerations which everyone must give a thought to for a secured future. “No one will ever care about your retirement investments as much as you do hence the need to educate yourself; when making retirement investments, seek professional and ensure that while you may have stopped working for money, your money should never stop working hard for you,” he said.

    Innovations introduced by the PFA to enable clients experience excellent and convenient service delivery include the Stanbic IBTC Pension Managers mobile office which was launched in Lagos recently, the first 24-hour multilingual call centre with representatives who speak the three major Nigerian languages – Yoruba, Igbo and Hausa; and also Pidgin English; a footprint of over 200 branches of Stanbic IBTC Bank where RSA clients can access pension service; Stanbic IBTC Pension Managers’ nine regional offices; as well as selected branches of Zenith Bank where the PFA operates. Other access points include Stanbic IBTC Bank ATMs, online service for RSA holders, email, SMS and the Pension Notes which accompany the hardcopy RSA statements sent to customers quarterly.

    Stanbic IBTC Pension Managers is a subsidiary of Stanbic IBTC Holdings, a member of Standard Bank Group, a full service financial services group with a clear focus on Corporate and Investment Banking, Personal and Business Banking and Wealth Management.

  • Guidelines on retirement benefits under the new pension scheme

    What is the retirement age under the Pension Reform Act 2004?

    The Act did not stipulate any retirement age. It depends on each employee’s terms and conditions of employment.

    What is the minimum period required by an employee to qualify for pension under the new scheme?

    There is no qualifying period for pension. If an employee works for an employer for one month, his pension contribution will be paid by the employer into the employee’s Retirement Savings Account (RSA) for that month. If the employee moves on to work for another employer for another 1 year, his pension contribution will be paid by the second employer for that period of one year, his pension contribution will be paid by the second employer for that period of one year and it goes on and on like that.

    When will I have access to money in my rsa?

    Access to the RSA will only be allowed upon retirement. If an employee retires at the age of 50 or more he/she can have immediate access to the RSA. Similarly, if an employee retires before he is 50 years due to mental or physical incapacity, he/she can have immediate access to his or her RSA. Whereas an employee who retires under 50 in accordance with the terms and conditions of employment will not access the RSA until after six months of such retirement if he or she does not secure another employment.

    Will gratuity be paid under the new scheme?

    Upon retirement, an employee can draw a lump sum by whatever name called from the balance standing to the credit of his or her RSA provided the balance after the withdrawal could provide an annuity of fund monthly payments that would not be less than 50 per cent of his monthly pay as at the date of his retirement. However, an employer may choose to pay any other severance benefits over and above the retirement benefits payable to the employee subject to the terms and conditions of his employment.

    Should gratuity be included in the actuarial valuation for determining accrued pension rights to be transferred from the old scheme into the RSA?

    If at the commencement of the Pension Reform Act 2004, the employee is entitled to gratuity (if he were to retire on that date), the gratuity shall be computed and included in the actuarial valuation as part of the accrued pension right of such employee.

    Can I withdraw any portion of the amount in my RSA before retirement?

    Withdrawals from RSA can only be made upon retirement. However, where an employee makes additional or voluntary lump sum contributions into the RSA, he can withdraw such money before retirement or attainment of the age of 50.

    What happens to the balance in the RSA after any initial lump sum withdrawal?

    The balance in the RSA will be used to procure an annuity that provides regular income to the contributor or fund a programmed withdrawal.

    What is programmed withdrawal?

    It is a method by which the employee collects his retirement benefits in periodic sums spread throughout the length of an estimated life span.

    What is an annuity?

    An annuity is an income purchased from an approved life insurance company which provides monthly or quarterly income to the retiree during his/her lifetime.

    • What happens when an employee who has been contributing under the new scheme dies before his retirement?

    Where an employee who has been contributing under the new pension scheme dies before his/her retirement, his retirement benefit shall be paid to his beneficiary under a will or the spouse and children of the deceased or in the absence of a wife and child, to the recorded next-of-kin or any person designated by him during his/her life time or in the absence of such designation, to any person appointed by Probate Registry as the administrator of the estate of the deceased.