MONDAYBUSINESS ECONOMIC INSIGHT PenOp kicks against proposed 75 per cent lump sum withdrawals

The Pension Fund Operators Association of Nigeria (PenOp), the umbrella body for all pension fund administrators in Nigeria has kicked against the proposed 75 percent lump sum withdrawal from the retirement savings account (RSA) of retirees.

PenOp said such a proposal if operational will be detrimental to retirees welfare at retirement as what may be left of their savings in the RSAs will not guarantee them quality living.

Recall in 10th May 2017, Senator Aliyu Wamako (Constituency - SokotoNorth) sought to pass a Law “For An Act To Further Amend The PRA 2104 To Provide For Definite Percentage A Retiree Can Withdraw From His RSA And For Other Matters Related Thereto”.

But PenOp in a paper titled “upholding and promoting the cause of the contributory pension system (CPS) in Nigeria” said the new Bill is faulty on many levels.

The current replacement ratio under the Contributory Pension Scheme is 50 per cent of last pay by virtue of the PRA 2014 and Regulations issued by the Commission.

PenOp observed that “one of the objectives of the CPS is to assist improvident individuals by ensuring that they save in order to cater for their livelihood during old age. The proposed amendment would mean leaving only 25 per cent to be spread over the life span of the retiree, which may be longer than 20 years, thus giving meagre monthly pensions below the current replacement ratio of a minimum of 50 per cent of last pay.”

“It is doubtful if the 25 per cent 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 his livelihood during old age. Accordingly, the proposed amendment would only result in the depletion of the RSA without regard for the retiree’s continued subsistence, thereby impoverishing retirees” it submitted.