Stories by Omodele Adigun
Since many organisations subscribed to the contributory pension scheme established in 2004, many employees, who are contributors to the Retirement Savings Account (RSA), are not in the know of how the system works.
Most often, these contributors keep asking : “when can I get my money in the RSA? How safe is this scheme? And what is the mode of payment after retirement? Questions like these and many more always keep popping up.
Mr. Usman Suleiman, the Managing Director/CEO of Future Unity Glanvills Pensions Ltd, is of the view that “everybody working will be expected to have a saving for his or her retirement. We therefore advise that everyone should have a retirement account no matter the sector one is working in.”
Suleiman is only echoing one of the provisions of the Act that sets up the scheme, which states: “Every eligible employee (private or public) shall maintain a Retirement Savings Account in his name with the Pension Fund Administrator (PFA) of his choice. The employee shall notify his employer of the PFA chosen and the identity of the Retirement Savings Account (RSA) opened.
“The employee and employer contribute a minimum statutory percentage (usually 7.5 per cent) of the employee’s monthly emoluments (comprising basic salary, housing allowance and transport allowance with others depending on grade level and employment service structure type) into the Retirement Savings Account of the employee. The contributions would be managed and administered by Professional Fund Administrators and held in custody by licensed Pension Fund Custodians. At retirement, the amount in the employee’s Retirement Savings Account would be the total contributions plus income and capital gain earned on the contributions made.”
Can a contributor withdraw money from the RSA before retirement?
Suleiman explains: “In terms of having to service employees who are out of job and will have to sustain themselves, the law has provided that in the event of the loss of job and inability to get another job for a period of four months and above, a client can apply to access 25 per cent of the balance in his account. This means that only 75 per cent will remain to be invested.” The implication of this is that after the 25 per cent has been withdrawn from your RSA, the balance cannot be touched until retirement. “If the employee, however, fails to get another job up till 50 years, he will come back as a retiree to fully access that account at lump sum as pension.”
However, IEI Anchor Pension Managers Limited states in its website that, “if you choose to make additional voluntary contributions (AVC) into your RSA, you are entitled to withdraw from your AVC any time before retirement (it is tax free if withdrawal is after five years). So if you’ve been putting some AVC in your retirement account or if you start now, you too can withdraw from that at any point before you retire.”
The company also provides answers to other frequently asked questions:
What happens to your balance after you withdraw your lump sum?
When you retire and take an initial lump sum from your RSA, the rest of the money will either be used to procure an annuity for you or it will be used to fund a programmed withdrawal that pays you for an estimated lifespan of not less than 18 years…in real terms…for life.
A programmed withdrawal is a method by which the employee collects his retirement benefits in periodic sums spread throughout the length of an estimated life span.
An annuity is an income purchased from an approved life insurance company, which provides monthly or quarterly income to the retiree during his/her lifetime but only the first 10 years are guaranteed, meaning if the retiree dies after 10 years, his/her beneficiaries get nothing.
Other than when you retire, when can you have access to your RSA?
There are special cases. For instance, if you retire before you’re 50 years old because of a mental or physical disability, your PFA will give you immediate access to your RSA. You can also claim 25 per cent of your pensions if you lose your job and can’t get a new one within four months.