Chuks Udo Okonta
The Chief Executive Officer (CEO) LASACO life Limited Dimeji Olona,
has urged insurers and Pension Fund Administrators (PFAs) to cooperate in
ensuring that retirees get better retirement saving plans.
Olona, in a statement by the Senior Manager Corporate Affairs
LASACO Assurance Plc, Mrs Jumoke Koleoso, stressed that both the PFAs and annuity
providers are partners in progress as there cannot be an effective
administration of annuity without involvement of PFAs who are supposed to
accumulate the fund to use in purchasing the annuity for life.
He said: “That the product is used to take care of the basic fear
of an intending retiree which is the risk of outliving his income which is
called longevity risk. This risk is borne by the insurance company if the
retiree lives very long. (i.e. a retiree that leaves service at the age of 60
and lives up to perhaps 90 years). Annuity for life can be used to solve the
financial burden at old age.”
He said Life Annuity authorized under the PRA 2004 is guaranteed
for 10 years (i.e. if the annuitant dies before 10 years, the balance would be
paid to the named beneficiary and if the annuitant survives the guaranteed
period, the annuity is payable thereafter as long as the annuitant lives.
Olona maintained one of the importance of annuity is that the
Investment Risk is borne by the Annuity Provider and not the policy holder
(annuitant) as a guaranteed sum is given to the annuitant on a regular basis in
spite of inclement/harsh investment climate that might be experienced by the
insurance company.
He commended the efforts of the regulators - NAICOM, National
Pension Commission and Lagos State Pension Commission at ensuring that the
retirees are well protected and that all the providers of both the Programmed
Withdrawal and Annuity work harmoniously and competes in a healthy environment.
These are ingredients needed for the success of the Contributory Pension Scheme
(CPS) of the government.
“Annuity is a series of payment made at (equal) intervals of time
in consideration of a lump sum or a regular contribution made over a
pre-defined period.
We have different types of annuity but the type being made popular
in Nigeria through the Pension Reform Act (PRA) 2004 is called Immediate
Annuity.
“Section 4 of the PRA allows an employee to use the amount accumulated
in his Retirement Savings Account (RSA) for the purchase of either programmed
withdrawal or life annuity at retirement or attaining the age of 50 years
whichever is the latter.
“He is also allowed to take a lump sum (at age 50 or at retirement
whichever is the latter) from the RSA balance provided that the amount left
after the withdrawal shall be sufficient to procure Annuity for life or fund
Programme Withdrawals that will provide an amount not less than 50 per cent of
his annual remuneration as at the date of his retirement.
“The Programmed Withdrawal is provided by the Pension Fund
Administrators (PFAs) while the annuity for life is provided by licensed life
insurance companies in Nigeria.
The Programmed Withdrawal and Annuity are two distinct options available
to the retirees.
“Both options, although have clearly distinct features; have been
carefully chosen by the regulators to protect the interest of the retirees.
The process of selecting the providers of either option is also
stringent to ensure that only the companies that are adjudged by the regulators
to be capable are licensed/authorized,” he said.
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