The Contributory Pension Scheme (CPS) provides for RSA holders to access part of their retirement benefits on some grounds before retirement and due qualification for lifetime pension payments.
The PRA took into consideration some specific circumstances which can enable an individual RSA holder to withdraw part of his or her Retirement Savings to cater for individual circumstances as the case may be.
In this article we highlighted what options are available to RSA holders both in the regular CPS and Micro Pension Plan. We also discussed the requirements for successful application of the temporary retirement benefits.
25% and 40% are the Numbers
Under the PRA 2014 (the Act), a RSA contributor is entitled to 25% or 40% of his RSA balance on satisfying some conditions.
According to S7(2) of the PRA 2014, it states that
“where an employee voluntarily retires, disengages or is disengaged from employment .., the employee may with the approval of the Commission, withdraw an amount of money not exceeding 25% of the total amount credited to his retirement savings account, provided that such withdrawals shall only be made after four months of such retirement or cessation of employment and the employee does not secure another employment.“
This means that where an RSA holder has been disengaged or even retires voluntarily before attaining the retirement age of 50 years, he or she can apply for a maximum of 25% of the RSA balance. In such a case, it must have been at least 4 months after such disengagement or voluntary retirement or resignation.
Reasons for disengagement could vary from health reasons to terms of service. It could even be a voluntary retirement or resignation by the employee.
However, this window is only opened once in a lifetime. Therefore, a RSA holder cannot withdraw another 25% of the RSA balance again if for instance, he loses his job or resigns at another employment before reaching the retirement age of 50 years. He or she will have to wait until attaining retirement to have full access to the RSA balance.
The above applies to individual contributors under the mandatory Contributory Pension Scheme and not those that joined the scheme voluntarily under the Micro Pension Plan (MPP).
For those in the MPP, unlike their counterparts under the mandatory CPS, they are allowed to withdraw 40% of their RSA balance 3 months after contributing while the rest can only be assessed at retirement. You can read up on the MPP here in our earlier publication (https://pensiontalk.com.ng/the-micro-pension-plan-2/).
According to S6.5.2 of the Guidelines for Micro Pension Plan, a contributor is allowed to withdraw a portion set aside from his total contributions. This portion is made available for Contingent Withdrawal and it is 40% of the total contribution. It can be assessed 3 months after making the contributions and once every week if there is still balance left in the Contingent Withdrawal portion of the RSA Balance.
How to apply for temporary Retirement Benefits under the CPS
Making an application for temporary retirement benefits under the CPS is quite simple. The PFAs will require the RSA holder to submit some documentation and an approval is sought from the National Pension Commission (PenCom) after which the payment will be made. This should not take more than a week to process.
The following documents are typically required from the RSA holder:
- An application letter by the RSA holder, requesting for the payment of the retirement benefit.
- Evidence of disengagement from service e.g letter of disengagement indicating that the RSA holder has been disengaged either voluntarily or on health grounds. This will also help know how long the disengagement has occurred. The minimum waiting period is 4 months.
For those in the MPP, an application for withdrawal request suffices provided it is 3 months after such individual has commenced Contribution into his RSA. Also, the applicable tax will be charged for this category of RSA contributor provided the contingent withdrawal was made on contributions that are less than 5 years.