Proposed Amendment of PRA 2014 Faces Stiff Opposition
The Centre for Pension Right Advocacy, has condemned the proposed amendment of the Pension Reform Act 2014 (PRA), insisting it will result in the depletion of the Retirement Savings Account (RSA) of retirees, impoverishing them and opening them to old age poverty.
The centre, also said the proposed amendment, would defeat the entire objective of the Contributory Pension Scheme (CPS).
Director of the centre, Ivor Takor, in a position paper titled ‘Move by Senate to Amend the Pension Act 2014’, faulted the federal government for the proposed amendment, which primarily seeks to enable retirees withdraw up to 75 percent of their pension savings. He argued that in view of the fact that one of the objectives of the CPS, established under PRA 2014,is to assist improvident individuals by ensuring that they save in order to cater for their livelihood during old age, it is doubtful if the 25 percent balance in a retiree’s RSA, after deduction of 75 percent lump sum, would if spread through the retiree’s expected life span, be adequate to reasonably cater for their livelihood during old age.
“The bill seeks to amend Section 7(1) of the Act as follows: To exclude persons who retire before the age of 50 years in accordance with the terms and conditions of their employment from accessing their RSA balance in line with Section 7(1) of the Pension Reform Act (PRA) 2014. Our position is corroborated by the proposed amendment in Section 2(c) of the Bill. This amendment seeks to ensure that persons who retire before the age of 50 years in accordance with the terms and conditions of their employment Section 16 (2) (c) of PRA 2014 access the RSA in line with the mode stipulated for employees who disengage or are disengaged from employment before the age of 50 years and are unable to secure another employment within four months Section 16(5). We note that such persons are only allowed to withdraw an amount of money not exceeding 25 percent of the total amount in the RSA Section 16(5)”, Takor stated.
He argued that those who retire under Section 16 (2) © have permanently left the service, while those who disengage or are disengaged under Section 16(5) are under frictional (temporal) unemployment and can still get another job and
continue with the scheme,. He posited that the proposed amendment would be unfair on an employee who duly retired in accordance with the terms and conditions of his employment and should not be allowed.
Takor, further noted that the bill, also seeks to amend Section 7 (1) of the PRA 2014 by inserting the words “of up to 75 percent” immediately after the words “a lump sum”.
He said the import of the proposed amendment, in line with the foregoing, was to allow some category of employees to rather than withdraw a lump sum based on a computation that allowed the balance in the RSA to be sufficient to procure a programmed withdrawal or annuity for life, can withdraw up to 75percent as lump sum, irrespective of whether or not the balance would be sufficient to procure a programmed fund withdrawals or annuity for life: