More retirees prefer programmed withdrawal to annuity
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
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
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.
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