Aisha Dahir-Umar: Why PenCom simplifies access to pension benefits


The National Pensions Commission (PenCom) recently approved and published revised regulations on the administration of retirement and retirement benefits. Aisha Dahir-Umar, Managing Director of PenCom, speaks on the reasons for review, modification and implementation by pension fund administrators (PFA).

Some stakeholders in the pension industry have applauded the recent release of the revised Regulations for the Administration of Retirement and Termination Benefits. What necessitated the revision of the regulations?

This is the first comprehensive revision of the Retirement and End-of-Career Benefits Administration Regulations since their initial publication in 2007. The Regulations guide the process of accessing retirement and end-of-career benefits through contributors and retirees under the contributory pension scheme (CPS). In line with its consultative approach, PenCom has obtained input from key stakeholders to ensure a more efficient and responsive administration of pension benefits.

New provisions have been introduced in the revised regulations to respond to new developments in the CPS in terms of the administration of retirement and end-of-career benefits. What are some of these new provisions in the revised regulations?

One of the novelties of the revised regulation is the simplification of the declaration and the supporting documents necessary for access to the RSA due to the temporary loss of employment. The provision dealt with situations where employers refuse to confirm the retirement or disengagement of their former employees. Before this revision, a letter of acceptance of resignation or disengagement issued by the employer was mandatory for a retired contributor requesting payment of 25% for temporary loss of employment. However, the revised regulations provide that where the employer fails or refuses to accept a letter of resignation from an employee, the pension fund administrator (PFA) must write to the employer confirming the employee’s resignation. and ensure that a copy of the acknowledgment is received and retained as evidence. When an employer does not respond to the request for a PFA within 30 days, the employer’s refusal constitutes acceptance of the employee’s resignation for the purposes of payment of the indemnities.

Another important provision of the revised regulations concerns the additional lump sum payment. The revised regulations clarified that retirees will be allowed to access an additional lump sum after an initial lump sum payment provided there are additional cash inflows into the RSA from employers. However, the additional payments must first be applied to increase the pension up to 50% of the retiree’s final salary, with the balance being payable as a lump sum. When the retiree’s pension has already reached 50% of the last salary, the retiree can choose to receive all the additional payments in the form of a lump sum. Where a retiree’s RLA additional contribution does not exceed N100,000, the amount must be paid directly into the retiree’s bank account, subject to the approval of the Commission.

The revised regulations also included new provisions to address issues related to the payment of benefits to contributors to the micro-pension scheme (MPP). This became necessary due to the peculiarities of the MPP. Under the MPP, all contributions paid are split into 40% for conditional withdrawals and 60% for pensions accessible at retirement. Payment of contingent and fixed portions of MPP contributions shall be in accordance with the MPP guidelines issued by PenCom. However, in order to access the fixed part of the MPP contribution, the MPP contributor must not be less than 50 years old. In addition, the revised regulations increased the payout limit for contributors with small RSA balances. In this respect, when the balances of the RSA do not make it possible to ensure a pension or a monthly/quarterly annuity of at least one third of the minimum wage in force, the retiree is authorized to deduct the entire balance from the RSA in block. This is an increase in the amount to be disbursed as a bulk payment from the maximum limit of 550,000 naira allowed as a bulk payment in the past.

The payment of missing persons benefits is one of the new provisions of the revised regulations. The revised regulations provide that in the event of the disappearance of an employee, the employer or the next of kin/beneficiary of the disappeared person shall notify the disappearance to the PFA after a minimum period of 12 months. When the PFA is satisfied with the identity of the next of kin/legal beneficiary, documentation and verification should begin. Upon receipt of the missing person notification report, PenCom shall, within 10 working days, appoint a Board of Inquiry (BoI) consisting of members drawn from the Commission, the Police Criminal Investigation Department and other stakeholders keys. If the BoI determines that the pension contributor is indeed absent, the process of paying benefits to the person’s next of kin/legal beneficiary should begin.

The revised regulations also provided for the “reappearance” of “deceased” RSA holders. It had been observed that some RSA holders who had been declared dead and all the benefits paid to their Legal Beneficiaries, “reappeared” after payment of additional sums on their RSA. The revised regulations provide that when an RSA holder is declared deceased, the PFA must write to the deceased’s bank notifying them of the death and advising them that the deceased’s bank account/BVN should be reported. This would thwart the actions of these fraudulent people.

Furthermore, in order to address the challenges faced by employees who wish to access their contributions to the Nigeria Social Insurance Trust Fund (NSITF), the revised regulations have established conditions applicable to private sector pensioners receiving NSITF benefits. It provides that any retiring employee who has contributed to the NSITF must notify the PFA of their intention to withdraw the NSITF contributions. A PFA will ask the retiree to provide the necessary documents and application to access the NSITF portion of the RSA balance. A PFA must forward all requests for access to the pre-deed portion of the RSA balance to the Commission for the granting of a no objection.

Over the years, pensioners have demanded an increase in their retirement pension. Has this revised regulation responded to this clamor?

A new provision on periodic pension enhancement for retirees under the Scheduled Withdrawal (PW) mode has been introduced in the revised regulations, which enshrines PenCom’s commitment to increase the monthly pension for retirees. The first Pension Enhancement was carried out in December 2017, following an analysis of the balances of retirement savings accounts (RSA) of retirees receiving pensions under the PW mode. It has been found that the returns on investment generated by PFAs could be used to increase the monthly pensions of retirees. The revised regulations provide that retirees whose RSA increases by at least 5%, from the date of the initial programming or the date of their last bonus, will be entitled to receive upgraded pensions. PFAs have been mandated to review retiree RSA balances at periodic intervals to determine eligibility for enhancement, as may be specified by PenCom. A pension enhancement model has been provided for recalculation of enhanced monthly or quarterly pensions to guide ATPs accordingly.

The revised regulations contain administrative sanctions against PFAs who flout the provisions of the regulations. How does PenCom monitor ATP to establish violations for administrative penalties to apply?

The commission monitors the activities of the PFAs through off-site supervision by reviewing reports submitted periodically and conducts on-site review to physically examine their records and seek necessary explanations for any discrepancies found. The administrative penalties are intended to ensure that PFAs promptly process all claims for benefits due to PenCom’s commitment to retiree welfare.

The revised regulations highlighted the different ways of paying pensions. How should PFAs ensure that future retirees make informed decisions about how to access retirement after retirement?

PFAs are necessary to properly inform a future retiree of the characteristics of the two modes of receiving periodic retirement benefits, namely the programmed withdrawal (PW) and the retirement life annuity (RLA). Second, each PFA must make available to future retirees a hard copy of the CPS retirement file, to enable them to make informed decisions. PFAs should also advise future retirees to check their websites / PenCom website to become more familiar with the CPS retirement package. The revised regulations further provide that PFAs should not require the future retiree to choose between PW or RLA. PFAs are also required to advise a potential retiree on how to complete the standard retirement notice form.

What should future retirees do to prepare for easy access to their retirement benefits?

Prospective retirees of Federal Government Treasury-funded Ministries, Departments, and Agencies (MDAs) who were in service prior to June 2004 must be listed in the Enhanced Contributor Registration System (ECRS). The retiree should complete the standard retirement notification form to facilitate the processing of retirement benefits. Participation in the online verification and registration exercise is also required. Other notable processes include submitting all relevant documents to the PFA at least six months prior to the retreat; execution of a PW agreement with the PFA of choice. If this is the preferred access mode or signature of a provisional annuity contract with a chosen insurance company if the retiree life annuity has been chosen. The retiree must then endorse the consent form.

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