In the second part of this article, we will look at the different ways contributions can be made into a micro pension plan account. You can read the first part of the article here.
How Are Contributions Made?
After a successful registration with the PFA, the MPP contributor will be given a unique Personal Identification Number (PIN) issued by PenCom. With the PIN, the Contributor can make contributions into his RSA account either with Cash or using an approved payment platform by CBN.
The PFAs have agents located at different locations who help them with the contribution collection. The MPP contributor can also use electronic means of payment to make contributions. Details of this is usually given to the contributor by the PFAs on how to make payment into their RSA account.
Please note that every contribution that is made is charged an administrative fee, which is the total and final charges of the fund administrator. All contributions that is less than ₦4,000.00 is charged a flat amount of ₦20.00 and all contributions from ₦4,000.00 and above is charged a flat amount of ₦80.00. There are no hidden charges. Those are the final charges.
Making Withdrawal From Mpp Account
To make a withdrawal from the MPP RSA account, the contributor has various options.
There are withdrawals allowed before retirement and there are those allowed only at retirement.
Withdrawals Allowed Before Retirement
An MPP contributor can make withdrawals from his RSA account before retirement only from the contingent portion of his total contributions. The contingent portion constitute 40% of contributions set aside for contingent purpose in the RSA of the contributor. However, the first withdrawal can only occur 3 months after the initial contribution, thereafter withdrawals can be made once every week.
It is allowed to fully withdraw the total amount of contingent portion in the RSA account if the contributor wishes to do so.
Please note that there is a tax implication for withdrawing the contingent portion before the end of 5 years of making the contributions. If the contingent portion is withdrawn before the end of 5 years of making the contribution, it will be subject to tax using the applicable PITA Cap P8 LFN 2011. This is treating the contingent portion as Voluntary contribution in line with S10(4) of PRA 2014. You can read more on the Voluntary contributions and the applicable tax rate here in my earlier post.
A contributor can also transfer or convert the Contingent portion of his RSA account to the Fixed portion at the end of every year i.e. once in a year. This is so allowed to enhance the fixed portion available at retirement.
In the same vein, a contributor can also transfer the balance in the Contingent portion of his RSA at retirement to form part of total pension payment package. This is can also happen where the MPP contributor secures an employment in the formal sector where his/her contributions will be moved to the appropriate fund under the CPS according to his/her age.
Withdrawals Allowed Only At Retirement
An MPP contributor is allowed to withdraw the fixed portion of his contribution only at retirement. The Fixed portion represent 60% of all contributions set aside for retirement purpose. Retirement happens at the age of 50 years or on medical grounds duly certified by a qualified health professional.
No amount of the fixed portion is allowed to be withdrawn before retirement. This portion of contribution is not subject to tax as it is tax exempt, unlike the contingent portion that can be subject to tax if withdrawn before the end of 5 years of contribution.
It is noteworthy to stress that whenever an MPP contributor decides to convert to any of the regular pension funds under the mandatory CPS on securing employment in the formal sector, the PFA should be notified immediately. If the contributor fails to do this, the PFA is empowered to move the MPP contributor’s RSA balance to the appropriate funds under the CPS after the receipt of the second contribution from the new employer without waiting for any directive from the contributor.
You can talk to your PFA to know more about their MPP services and ways they can help you further.