There are different types of pension products introduced under the CPS.
These pension products are offered by the Pension Fund Administrators (PFAs) to suit the peculiar circumstances of the pension contributor. The CPS takes into consideration different circumstances both pre-retirement and post-retirement that a pension contributor is likely to encounter.
Generally, these are the different pension products on offer by the PFAs in Nigeria:
Pre-retirement benefit
- 25% Withdrawal
Post retirement benefits
- En-bloc payment
- Programmed Withdrawal
- Annuity
Others retirement benefits
- AVC Benefit Payment
- Death Benefits Payment
- Gratuity payments
25% Withdrawal: This is a pre-retirement benefit payment made to a RSA holder who has lost his job at least for a minimum of 4 months and still remains unemployed. This type of benefit payment allows the RSA contributor to have access to a maximum of 25% of his/her RSA contributions. Please note that 25% payment is not given by default but on request by the RSA holder. Therefore, it is the RSA holder that will send the application requesting for payment to the PFA before the payment is processed.
En-bloc Payment: This is a post retirement benefit product paid to a retired RSA holder whose calculated pension as at the time of retirement is less than one-third of the minimum wage. This means that the whole amount is given to the RSA contributor or beneficiary in total and the retirement account closed completely. This means that no further pension payment is given to the retiree after this payment is made.
Programmed Withdrawal (PW): This is a retirement benefit payment that is given to a retiree whose RSA balance is more than N550,000 as at the time of retirement. It is the default benefit plan for such a retiree unless he or she decides to opt for the Annuity product of an insurance company. The PW allows the retiree to draw periodic pension for as long as he or she has a balance in the RSA. The pension payment is usually paid monthly or quarterly to the retiree.
Annuity: This is also a post retirement pension product that is available to a retired RSA holder who has decided to move his retirement savings balance to an Insurance company instead of his PFA as allowed under the Pension Reform Act (PRA 2014). The Annuity is a product of a life insurance company. Just like the PW discussed above, the annuity allows the retiree to draw periodic pension payment but for a minimum guaranteed period of 10 years. Once purchased, the Retiree is not allowed to move his money back to a PFA.
Other Retirement Benefits Payments:
There are other retirement benefits payments that are offered by the PFAS. These include:
AVC Payment: AVC stands for Additional Voluntary Contribution. As the name implies, it is the additional contributions made by the RSA holder. This can be only be withdrawn after 2 years of making the first AVC contribution into the RSA. However, only a maximum of 50% of the AVC is allowed to be withdrawn pre-retirement while the balance will be added to the RSA balance and only withdrawn after retirement.
Death Benefits (DB) Payment: A DB payment is one that is made to the beneficiary of a deceased RSA holder. The DB payment is payable once all necessary conditions are satisfied and required documents presented by the beneficiary.
Gratuity and Other Payments: Some organizations maintain gratuity schemes for their employees. These benefits are payable to the employees upon satisfying some work related conditions such as specified number of working years, etc. Upon retirement, these employees are qualified for some retirement benefits based on their employment contracts. The PFAs manage some of these approved retirement schemes on behalf of these organizations and pay the retired workers upon the instruction of their employers.
There are other approved schemes that pay monthly pensions too and are managed by the PFAs. These schemes, however, had been in existence before the commencement of the CPS in June 2004 and the owners have opted to maintain them after satisfying the required regulatory requirements. Please note that such schemes are not open to new members after the commencement of the CPS and eventually it is expected that the schemes will be liquidated over a period of time.
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