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| Managing Director Zenith Pension Fund Custodian Nkem Oni-Egboma and Executive Secretary PenOp Susan Oranye at PenOp's annual media retreat in Lagos. |
BENEFIT PAYMENT PRESENTATION
BY
RONKE ADEDEJI
MD LEADWAY PENSURE PFA
Pension Operators of Nigeria (PENOP)
CONTENTS
Overview of the Pension Reform Act (PRA) 2014
-Objectives of the PRA 2014
-Features of the PRA 2014
Assessing Retirement Benefits
-When
-How
-Requirement for Accessing Benefits
Mode of Access
-PW & Annuity
PRA
2
OVERVIEW OF THEPRA-2014
3
•Ensure that every worker receives his retirement
•benefits as and when due
•Promote a savings culture
•Establish uniform set of rules, regulations and standards
•Establish a strong regulatory and supervisory framework
•Establish a system that is financially sustainable, simple, transparent and safe.
OBJECTIVES OF THEPRA 2014
PRA
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•Contributory Pension Scheme is Mandatory
•Coverage extended.
(1)Public Service of the Federation
(2)Public Service of the Federal Capital
(3)Public Service of the State Governments
(4)Public Service of the Local governments
(5)Private Sector
•Applicability clarified
(1)Any employment
(2)Private Sector with 3 or more employees
(3)Any one not covered by all of the above may participate by way of Voluntary Contributions
•Minimum Contribution increased to 18% (Min EE –8.0% & ER –10% of emoluments).
PRA
FEATURES OF PRA 2014
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•All Investment Returns accrue to the Contributor via individual Retirement Savings Account (RSA)
•All contributions, income on investment and benefit payments are tax free
•Privately managed by Pension Fund Administrator (PFA).
•Third party custody of pension assets by Pension Fund Custodian (PFC)
•PFAs are strictly regulated and supervised –National Pension Commission (PENCOM)
PRA
FEATURES OF PRA 2014
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•Group Life insurance mandatory -minimum of 3 times annual total emolument
•Proceeds of Life Insurance to be paid by Insurance Company to deceased beneficiary
•Employers who do not effect Insurance are liable to make payment of the claims
•A percentage of RSA account may be applied towards payment of equity contribution for residential mortgage by RSA holder
PRA
FEATURES OF PRA 2014
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WHEN TO ACCESS RETIREMENT BENEFITS
ØBenefit can be accessed in at the following points:
(1)Exit
ØRetirement –Mandatory, Compulsory, Voluntary
ØResignation
ØTermination -Redundancy, Disengagement
(2)Medical grounds
(3)Death/Missing Person
8 HOW TO ACCESS RETIREMENT BENEFITS
(1)Upon Retirement or attaining 50 years of age (whichever is later)
Balance on RSA can be utilized for lump sum payment provided the balance on the RSA afterwards is sufficient to procure a Programmed Withdrawal or Annuity for life in line with PenCom guidelines
(a)Programmed monthly or quarterly withdrawal from PFAor
(b)Annuity for life from Life Insurance Company
(2)If the terms and conditions of employment allow retirement before 50 years can access 25% of the balance on RSA
(3)Upon disengagement or resignation before the age of 50 and does not secure another job within 4 months, can access 25% of the balance on the RSA
9 PRE–RETIREMENT ACTIVITIES
}Public Sector Employees are to attend the PenCom verification and enrollment exercise, the year before the retiring year. This ensures the remittance of accrued benefits rights.
The following are documents require for the exercise:
◦Certified copy of First appointment letter;
◦Record of service by the MDA/Ministry;
◦Last Promotion Letter;
◦Certified Copy of June 2004 Payslip;
◦Passport Picture; and
◦Birth Certificate/Age declaration
}PFAs are to notify public and private sector customers with 6months to retirement.
10 REQUIREMENTS FOR ACCESSING RETIREMENT BENEFITS(PUBLIC SECTOR)
ØCopy of official notice of retirement from employer.
ØPayslip for any of the last three months before retirement month.
ØCopy of the PenCom Retirement Benefit Registration Slip.
ØOne passport photograph.
11 REQUIREMENT FOR ACCESSING RETIREMENT BENEFITS(PRIVATE SECTOR)
ØOfficial notice of retirement from employer.
ØPayslip for any of the last three months before retirement month or evidence of annual remuneration.
ØLetter from ex-employer confirming status of outstanding remittance (Accrued Pension Right).
ØOne passport photograph.
ØAge Declaration/Birth Certificate.
12 REQUIREMENT FOR ACCESSING RETIREMENT BENEFITS (ON MEDICAL GROUND)
ØCertified true copy of a medical certificate issued by a properly constituted Medical Board or a suitably qualified physician;
ØThe letter of notification of retirement issued by the employer also authenticating the medical certificate; and
ØAll other requirement, based on the category of application (i.e. public or private)
13 REQUIREMENT FOR ACCESSING A DECEASED’S BENEFITS
The PFA shall establish the identity of the Next-of-Kin and shall demand for:
(i) Certified True Copies of Letter of Administration or Will admitted to Probate.
(ii) Certificate of registration of Death or other evidence
Payment is made to the beneficiary named in the Will or persons named in the Letter of Administration or other Court documentation.
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PROGRAM WITHDRAWAL VS ANNUITY
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| Features | Programmed Withdrawal (PW) | Annuity |
| Administration | PW is a product offered by Pension Fund Administrators (PFAs) regulated by the National Pension Commission (PenCom). | Annuity is a product offered by Life Insurance companies regulated by the National Insurance Commission (NAICOM). |
| Payment Period | Pays pension over an expected lifespan and for as long as the Retirement Savings Account has funds. | Pays pension for life with a minimum guaranteed payment period of 10 years. |
| Payment to Beneficiary when the retiree dies | Whenever the retiree dies, the beneficiary under a will or Letter of Administration is paid enbloc the balance in the Retirement Savings Account. | If the retiree dies within the guaranteed payment period of 10 years, the surrender value of the remaining amount within the period shall be paid as lump sum to the estate of the retiree or named beneficiary. However, if the retiree dies after 10 years, the named beneficiary will not receive any payment. |
| Features | Programmed Withdrawal (PW) | Annuity |
| Frequency of payment | Pension payment can either be monthly or quarterly, based on the retiree’s choice. | Annuity payment can either be monthly or quarterly. |
| Account Updates | Retiree receives RSA statements. Monthly/quarterly |
No statement of account is given to the retiree. |
| Custody of Funds | PW retiree’s assets are held by Pension Fund Custodian thereby providing enhanced security. | Annuity retiree assets are held by the Insurance company. |
| Change of Withdrawal mode | A retiree on PW with a PFA can choose to terminate the PW and convert to Annuity contract with an Insurance company at any time. | A retiree on Annuity with an Insurance company cannot change to PW with a PFA. |
| Features | Programmed Withdrawal (PW) | Annuity |
| Growth in Funds | Returns on investment belong to the retiree and credited to RSA provides opportunity for enhanced payments. | Returns on investment belong to the pool of insurance funds and not the retiree. Payment is fixed ab-initio. |
THANK YOU
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