How Safe Is It To Have A Pension Plan In Nigeria? READ ALL YOU NEED TO KNOW

A lot of people are Skeptical about pension plans in the country because they don’t want to lose their money. People certainly have doubts about these things and that is obviously why only less than 10 per cent of the workforce has enlisted in the new Contributory Pension Scheme (CPS).

But is there really anything to worry about? Is it safe to commit your money to a Pension Fund Administrator (PFA) and expect to get it back?

The first thing here is that there is a Regulator, National Pension Commission (PenCom) set up by the government to oversee the entire Pensions industry in the country. Their job is to make sure your Retirement Savings Account (RSA) is secure with the Pension Fund Administrator you choose and that you are kept informed, treated properly and your money keeps yielding return.

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Safety (Checks and Balances)

Besides, people who think their PFA will divert their money need to know that PFAs DO NOT keep your money, let alone use it for private purposes. All they get are administrative fees of Maximum N100 per RSA remittance and 1.6 per cent annually of the asset value.

Pension funds in Nigeria are in the custody of Pension Fund Custodians (PFCs); financial institutions approved by the Federal Government and owned/backed by banks with huge capital base, experience and unassailable professional integrity to handle such funds.

The PFCs can only advise the PFAs within the regulatory investment guidelines of PenCom on the financial instruments to grow the funds.

Process:

When your employer deducts a fraction of your salary (10 per cent from the employer, eight per cent from the employee of your salary as pension contribution, they pay this money to PFC who then notifies the PFA that you’re registered with that the funds have come. Your PFA then updates your accounts with them and there is no room for suspicion. So even if your PFA ever goes under which is highly improbable, your money is safe with the Pension Fund Custodian (PFC).

Moreover, every PFA is mandated by law to maintain a Statutory Reserve Fund that is an extra safety measure just in case anything goes wrong with the PFA.

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Access to Pension Funds

Even at that, there are people who think the government might take from their pension money. But of course the government doesn’t involve itself in the affairs of the pension firms and certainly won’t have access to your pension.PenCom is the only government body that is involved here and they only regulate and make sure your money is safe.

Pension funds are generally tamperproof. Even when huge pension funds are made to play a role in national development, it is mainly through the issuance of government bonds where the risk involved is minimal. Operators ensure the funds invested are SAFE, LIQUID, and YIELD RETURNS.

You can start taking from your retirement savings when you retire or when you are 50 years old depending on your agreement with your employer.

Exceptional payments before Retirement

But the good part of joining the CPS is that you could actually get up to 25 per cent of the balance in your RSA if you ever lose your job and can’t get another one within four months. So you can get by with some of your money until you get back on your feet.

If death should occur before retirement, the balance in the RSA account is paid to the beneficiaries in the Will. If no Will exists then the beneficiaries listed in the Letter of Administration will be paid.

Updates on Account

What’s also good is that your PFA won’t just collect your savings and keep you in the dark. They’ll be in touch with you and send you regular statements about your account and how well the investments they are making on it for you is doing. So at every point you’ll know how much you have in there to keep you assured that your money is safe. This is actually the way it works.

Even retirees must receive alerts on or before the 24th of every month to show the inflow of their pensions.

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Whistleblowing

A lot of employers don’t open RSAs for their employees and these employees don’t bother to seek to open one for themselves because of their skepticism. But really it’s very important for Nigerians, especially young professionals, to think about the future and all workers open an RSA where they can put aside something regularly for the future, so they can have something solid to fall back on to continue looking after themselves and their families when they retire.

If an employee’s salary is being deducted with pension contributions by his/her employer but the funds are not being credited to his RSA, he must inform his PFA who will confirm when last funds entered his RSA, if any. If the pension contributions are not up-to-date, the employee MUST inform PenCom who will take the necessary steps to ensure the employer pays back that money into the employee’s RSA. Same thing goes for employees whose employer does not have any plan in place.

Simply send an email to info with the Subject: Non-Remittance of staff pension contribution – (Name of Employer). Explain the situation and clearly provide specific details of your employer’s name, address and contact details.You can do it anonymously too, just make sure PenCom can get to your office.

Statistics

a. Nigeria has some of the highest numbers of elderly living in abject poverty in Africa.

b. Total assets under management are <5 67="" africa="" approx.="" gdp="" is="" nigeria="" of="" s="" south="" strong="" their="" unlike="" which="">

c. Total number of contributors is <10 of="" population.="" strong="" the="" working="">

d. CPS started with a deficit N2 Trillion due to government mismanagement.

Data Sheet

a. PenOp is made up of all the Pension Operators in the country and focuses on driving initiatives that grow the industry, educate general public, informs National Assembly/policy makers of issues that need to be addressed, collaborates with key stakeholders in Fin services industry.

b. Pension industry has 32 Operators – 21 PFAs, 7 CPFAs, 4 PFCs

c. Regulator is National Pension Commission (PenCom)

d. Contribution – 18% (10% employer, 8% employee)

e. Compulsory for companies with 3 or more employees, State/Local govts

f. Operators invest >50% in FGN bonds due to the safety levels

g. Operators under pressure to use pension funds to invest in private equities and infrastructure projects.

h. Pension contributions can only be made through an employer for now.

i. If an employee feels they want to add more towards their retirement savings they can do so using the AVC (Additional Voluntary Contribution) but must still pass through their employer ie salary account.

j. All pension contributions are tax-free.

k. PenOp partnering with CBN and other stakeholders to promote financial inclusion by finding ways to reach the financially excluded people in rural areas.

l. Programmed Withdrawals is the monthly payment made to retirees by Pension administrators while Annuities are paid by Insurance companies.

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