Nigeria’s Pension Reform Act 2014 makes provisions for employees to access part of their Contributory Pension savings before they retire. However, withdrawals have implications on the monthly pension stipends such workers will get at retirement.
The Contributory Pension Scheme was established to provide regular monthly stipends for Nigerian workers in retirement.
Contributory Pension Scheme makes it mandatory for employers and employees to contribute 10 per cent and eight per cent of the workers’ monthly emoluments into their Retirement Savings Accounts with the Pension Fund Administrators, which the worker will access at retirement.
However, there are peculiar conditions in which workers may be allowed to access part of their savings before they retire.
Here are conditions to Access Contributory Pension Savings before Retirement
- Job loss
- Self-employed
Job Loss
The Pension Reform Act 2014 states that a worker can access 25 per cent of the savings in his RSA, if he loses his job and does not get another job after four months.
The PenCom states that temporary loss of employment or disengagement happens when an employee voluntarily retires, disengages or is disengaged by the employer before attaining the age of 50 years and is unable to secure another employment after four months of the disengagement.
Contributory Pension Savings account holder who lost his employment can as well access part of the funds to fund mortgage scheme, to enable him be become a house owner.
To access 25 per cent of RSA in the event of temporary loss of employment, PenCom’s revised regulation on the administration of retirement and terminal benefits requires the individual to submit some documents.
“That person must give you an offer letter for a loan that he is ready to finance you, and this is the equity contribution you are required to bring. So if you have that equity contribution with that letter of offer, which has been validated by the mortgage lender, that is when you can approach your PFA to request for your 25 per cent.”
PenCom states that the maximum amount to be withdrawn is 25 per cent of the total mandatory RSA balance as of the date of application, irrespective of the value of equity contribution required by the mortgage lender.
Where 25 per cent of a contributor’s RSA balance is not sufficient for payment as equity contribution, the RSA holders may utilise the contingency portion of their voluntary contributions (if any).
Self-employed
Section 2(3) of the Pension Reform Act, 2014 made provisions to allow employees of organisations with less than three employees as well as the self-employed persons to participate in the Contributory Pension Scheme, which is regarded as Voluntary Contributory Pension Scheme under the Micro Pension Plan.
The informal sector workers under the Micro Pension Plan can also access part of their savings based on the regulatory guidelines. The regulatory guidelines by National Pension Commission allows the self-employed contributors under MPP to access at least 40% of the contributions in their RSAs.
However, to start withdrawing the 40 per cent contribution, the artisan must have contributed to his RSA for a minimum of three months.
However, the CPS was opened to the informal sector in March 2019, as part of the financial inclusion objectives of the Federal Government.
These categories of persons mainly in the informal sector constitute the vast majority of the working population in Nigeria and are not covered by any retirement benefit scheme.