PFAs, insurers pay retirees N300bn in eight years

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Pension Fund Administrators have released a total sum of N300bn to 130,224 retirees under the Contributory Pension Scheme between 2007 and 2015, investigation has shown.
Statistics obtained from the National Pension Commission on Thursday indicated that 111,756 of the retirees were paid the monthly pensions of N3.4bn through their PFAs, while 18,468 received N917.7m monthly from insurance companies.

The commission also facilitated the transfer of N91.5bn premium from the PFAs to insurance companies underwriting annuity for the monthly payment to their retirees.

Under the Pension Reform Act 2014, workers are not allowed to take everything saved in their Retirement Savings Accounts during their working years when they retire.

They are, however, entitled to a lump sum from the balance in their RSAs, while the rest will be paid to them monthly, either as programmed withdrawal or as annuity.

For pensioners who decide to go for programmed withdrawal, the law mandates their PFAs to pay them an agreed sum monthly for an estimated period.

But if a retiree decides to opt for annuity, the law stipulates that the remaining balance in his RSA will be transferred to an insurance company of his choice that will be paying him till he dies.
Figures obtained from PenCom showed that retirees under the programmed withdrawal scheme started receiving their pensions in 2007, while annuitants commenced theirs in 2010.

It was learnt that the pensioners who wanted annuity could not start getting their pensions early because of the delay in releasing the guidelines to regulate the operations of the insurance companies that would be administering it.

This was said to be because the insurance sector was undergoing recapitalisation, which ended during that period. The annuity guidelines were jointly released by PenCom and the National Insurance Commission in 2009.

PenCom has continued to regulate the pension funds under the management of the PFAs, while NAICOM regulates the annuity funds being managed by the insurance companies.
Under the recent prudential guidelines released to the insurance companies by NAICOM, it was stated that a retiree’s life annuity provider must maintain separate books of account for the annuity funds distinct from its other insurance or annuity operations.

“The retiree life annuity funds and supporting assets and liabilities shall be disclosed separately by way of notes in the audited financial statement and all management accounts of the company,” NAICOM noted.

PenCom also recently amended its investment guidelines for the PFAs to align with the developments in the financial markets.

Since the inception of the CPS, the commission has updated its investment regulations four times. The first review took place in 2007, while subsequent reviews took place in 2008, 2010 and 2012.
The Director-General, PenCom, Mrs. Chinelo Anohu-Amazu, said the CPS ushered in a uniformed pension scheme for workers in both the private and public sectors.

“The law, whose implementation started in June, 2004, reformed the crisis-ridden unfunded and under-funded defined benefit pension schemes in the country,” she said.

According to her, the number of contributors has increased; more workers in the private and informal sectors were covered and the scheme has continued to impact positively on the Nigerian economy.