New lump sum withdrawal template rattles retirees

The new template for the withdrawal of lump sum introduced by the National Pension Commission (PenCom) has rattled some retirees who are waiting for their retirement benefits.

The new template has removed a cap on the amount retirees can take as lump sum from their retirement savings accounts (RSAs) as against the 25 per cent to 50 per cent which could be taken before now. 

The spokesperson of PenCom, Peter Aghahowa, explained t

hat the new template was designed to ensure that retirees get 50 per cent of their last salary as monthly pension while what is left in the retiree’s RSA can be withdrawn as lump sum.

Aghahowa said the template is automated as it automatically matches a prospective pensioner’s RSA balance with salary to arrive at what the retiree can take as pension and lump sum.

However, some retirees are unhappy with the development and called on PenCom to reverse the policy and possibly increase the lump sum beyond 50 per cent.

A retiree, Lawal Maiadua, told Daily Trust that his pension fund administrator (PFA) told him that took effect in April 2018, but affected those that retired in April 2017 and Above. 

“We believed there is need to be fair to all by revisiting this issue. How can someone who retire a year plus will be affected with the new policy and also someone with total benefit of N19 million plus will be given less than N5 million and his monthly pension will be less than N90, 000?” he asked.

Maiadua pleaded with PenCom to make the new policy optional, “otherwise this can only succeeded in aiding corruption.”

Another retiree, Abubakar Aliyu, also expressed dissatisfaction with the new template, asking PenCom to allow retirees take more than 55 per cent of their RSA balance as lump sum.

“Let us have a say in the affairs of our hard earned money. Let us have more than 55 per cent as gratuity as we’re more than 50 years of age, old enough to know what we want please,” he said.

Abubakar said “every right thinking human being knows that gratuity is more important than pension. Don’t spoil our gratuity please,” he said. 

Another retiree affected by the new policy, Ahmad Rabi’u Dina, told Daily Trust that the template is not in favour of retirees.

He said he retired May 10, 2017 and PenCom brought out the new template on May 15, 2018 and wondered why the template will affect his lump sum.

He said such a policy should be made for Staff in active service with long term savings and not workers who have already retired and are waiting for their delayed retirement benefits.

“Payment of gratuity and monthly pension should be optional for retiree who is 60 years of age or 35 years in service. January to March 2017 retirees were paid with former template, and we retired the same year. There is no justice,” he said. 

Lump sum withdrawal has always been contentious. Recently, Senator Aliyu Wamakko sponsored a Bill at the National Assembly for An Act to Amend the Pension Reform Act (2014) to allow retirees take up to 75 per cent of their savings in their RSA as lump sum. 

A pension expert, Sani Mustapha, told Daily Trust that it would be a disaster for the pension industry and retirees if they take up to 75 per cent of their savings as lump sum.

Mustapha said holders of RSAs should note that their savings in the accounts belong to them and they do not necessarily need to withdraw lump sums unless they have pressing needs.

Section 7, subsection 1, Paragraph A to C of the Pension Reform Act, 2014, provides that a holder of a RSA shall, upon retirement or attaining 50 years, utilise the savings for retirement benefits through lump sum withdrawal, programmed withdrawal and annuity for life.

Paragraph A provides that an RSA holder is entitled to “withdrawal of a lump sum from the total amount credited to his retirement savings account provided that the amount left after the lump sum withdrawal shall be sufficient to procure programmed fund withdrawals or annuity for life in accordance with extant guidelines issued by the commission, from time to time.”