NIA laments inability to harness annuity market

By Sola Alabadan

Senior Correspondent

The Nigerian insurance operators have lamented that they were unable to harness the great business opportunity in the annuity market in spite of the fact that the Pension Reform Act has since 2004 stipulated that life annuity is one of the two options available to retirees as mode of collecting their pension benefits.

The Chairperson of Life Offices Committee of the Nigerian Insurers Association (NIA), Mrs. Bola Odukale, confirmed this in a report by the association in Lagos recently.

She said one of the challenges facing the nation’s insurance industry is the “inability to fully harness the great business opportunity in the annuity market, which has hindered the growth of our annuity business as an industry.”

Although the life insurance companies have been offering annuity products before the enactment of the Pension Act, this confirmation by the NIA’s committee has always been an issue the insurance practitioners have always complained about.

Upon retirement, Retirement Savings Account (RSA) holders are required to choose either programmed withdrawal, a product of the Pension Fund Administrators (PFAs) or annuity for life being offered by life insurance companies as a method of collecting their pension benefits.

However, the National Pension Commission (PenCom) disclosed that out of the 95,840 workers who had retired under the Contributory Pension Scheme (CPS) established by the Pension Act, a total of 86,628 pensioners chose programmed withdrawal, while 9,212 retirees opted for life annuity.

Although PenCom believed there is an increasing level of retirees’ awareness of annuity plan as alternative option to the programmed withdrawal method of collecting pension, the insurance operators in charge of annuity and the PFAs have continued to express divergent views on why big disparities exist between retirees choosing programmed withdrawal and those on annuity.

While the NIA had initially posited that insurers were alleged not to be serious enough to offer annuity to retirees, the insurance operators later claimed that the PFAs were discouraging the retirees from choosing annuity and that the pension operators were promising to offer retirees more benefits if they choose programmed withdrawal.

The pension managers, on the other hand, asserted that majority of retirees opted for programmed withdrawal instead of life annuity because they are convinced that they can continue to trust the PFAs that had managed their pension contributions.