Pension Fund Administrators (PFAs) shall continue paying pensions to retirees that have fully exhausted their Retirement Savings Accounts (RSAs) balance from their statutory reserve.
This directive was handed down to the PFAs by the National Pension Commission (PenCom) in a recent Framework on Pension Enhancement for existing retirees on programmed withdrawal under the Contributory Pension Scheme (CPS).
In the framework, PenCom directed PFAs not to stop the pension of retirees who may have depleted the balance of their RSAs “pending implementation of Minimum Pension Guarantee (MPG).’’
Despite fears that many retirees may stop receiving pension once their RSAs are depleted due to longevity, this latest directive from the country’s apex regulatory body for pension matters is a major indication that retirees on programmed withdrawal will likely receive pension for life.
Section 71 of the Pension Reform Act 2004 (now amended 2014) provides for the establishment of a minimum pension guarantee for all workers who have contributed for some years but have not accumulated enough to have a minimum pension at retirement.
“This guarantee comes into play when a member does not have enough accumulations to enable him to draw down a pre-specified minimum benefits; the State provides the required assistance by topping up the member’s account with the required amount. Thus, the MPG can provide progressive transfers to those with less than complete contribution histories while taking income into account to avoid some leakages,” a former governor of Edo State, Comrade Adams Oshiomhole, said at a conference on CPS implementation.
For the smooth operation of the minimum pension guarantee, Section 82 subsection 1 of the Pension Reform Act 2014 provided for the establishment of pension protection fund to provide minimum pension guarantee for contributors who have insufficient funds in their RSAs.
The Act requires the federal government to fund the pension protection fund from an annual subvention of one per cent of the total monthly wage bill payable to employees in the public service of the federation and returns from pension fund investments.
The fund is also expected to be funded from the annual pension protection levy paid by the National Pension Commission (PenCom) and all licensed pension operators at a rate to be determined by the commission from time to time.
It is expected that PenCom would have to come up with guidelines and regulations for the implementation of the minimum pension policy.
Findings also show that PFAs are required to maintain a Statutory Reserve Fund, which shall be credited annually with 12.5 per cent of the net profit after tax, or such percentage of the net profit as may be stipulated by PenCom to meet claims.
A compliance officer in every PFA ensures compliance with the statutory reserve requirement of PFAs.
