More re­tirees pre­fer pro­grammed with­drawal to an­nu­ity

Daily Trust - - BUSINESS - By Fran­cis Arinze Iloani

After ac­cess­ing 25 per cent lump sum from their pen­sion sav­ings, data have shown that more re­tirees in Nige­ria pre­fer pro­grammed with­drawal to an­nu­ity.

The Pen­sion Re­form Act (PRA, 2014) al­lows re­tirees in the coun­try the right to choose be­tween pro­grammed with­drawal and an­nu­ity as ways of get­ting their pen­sions over in re­tire­ment.

Data ob­tained from the Na­tional Pen­sion Com­mis­sion (PenCom) showed that since in­cep­tion of the Con­trib­u­tory Pen­sion Scheme (CPS) to the first quar­ter of this year, 132,405 re­tirees opted for pro­grammed with­drawal for

Ques­tion:

their monthly pen­sion pay­outs as against 29,620 re­tirees who chose an­nu­ity for their pen­sion pay­outs.

While pro­grammed with­drawal is a prod­uct of Pen­sion Fund Ad­min­is­tra­tor (PFA) in which re­tirees are paid pen­sion over an ex­pected life span, an­nu­ity is a prod­uct of in­surance com­pany in which re­tirees are paid pen­sion for life.

In both pen­sion pay­ment op­tions, a re­tiree can col­lect lump sum pro­vided monthly pen­sion is 50 per cent of last salary.

The to­tal num­ber of re­tirees on pro­grammed with­drawal had leaped from 126,775 as at the end of last year to 132,405 in the first quar­ter, 2016.

A sec­toral break­down of those that re­tired un­der the PW shows that the pub­lic sec­tor ac­counted for 71.74 per­cent (4,039) of to­tal re­tirees on PW dur­ing the quar­ter while the pri­vate sec­tor recorded 28.26 per­cent to­talling 1,591 re­tirees.

PenCom ap­proved a to­tal of 3,288 ap­pli­ca­tions for an­nu­ity re­tire­ment plan dur­ing the first quar­ter of this year, bring­ing the to­tal num­ber of re­tirees re­ceiv­ing their re­tire­ment ben­e­fits through the an­nu­ity plan to 29,620, which is far less than the num­ber of those on pro­grammed with­drawal.

The data an­a­lysed by the Daily Trust re­vealed that since in­cep­tion to the first quar­ter of this year, a to­tal of N4.37 bil­lion had been paid as monthly

An­swer:

pen­sion to the re­tirees on pro­grammed with­drawals by the PFAs.

The re­tirees on pro­grammed with­drawal also got N329.38 bil­lion as lump sum be­fore their monthly pen­sions started.

How­ever, over the same pe­riod, N1.51 bil­lion had been paid to re­tirees on an­nu­ities by their in­surance com­pa­nies.

The re­tirees had paid N145.04 bil­lion to the in­surance com­pa­nies to pur­chase their an­nu­ities, thereby trans­fer­ring their longevity risks to the com­pany for their guar­an­teed monthly pay in re­tire­ment.

The re­tirees on an­nu­ity had also taken N41.85 bil­lion over the same pe­riod as 25 per cent lump sum from their pen­sion sav­ings.

PTAD in­her­ited nonex­is­tent data base of re­tirees and this ne­ces­si­tated ver­i­fi­ca­tions to iden­tify the au­then­tic re­tirees and elim­i­nate the ghosts. Pen­sion­ers are be­ing ver­i­fied once and for all to build a per­ma­nent data base and they will not be re­quired to do another ver­i­fi­ca­tion for life. PTAD has al­ways put in place mea­sures to en­sure that the ver­i­fi­ca­tions are done in se­cure lo­ca­tions and the pen­sion­ers do not go through stress dur­ing the ex­er­cises.

- PTAD Send your views, re­ac­tions and ques­tions to pen­sion@dai­lytrust.com

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