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As the contributory pension scheme established by the Pension Reform Act 2004 is compulsory for all workers in the public service and for organisations in the private sector where there are five or more employees, majority of the working population is affected by the law.
It is, therefore, imperative that the contributors under the new pension dispensation in the country know the status of their contributions on a regular basis to forestall a situation where they will be short-changed.
As provided for in the Pension Act, every employee to whom the Act applies is required to maintain an account known as retirement savings account in his name with any pension fund administrator of his choice.
Once an individual open a Retirement Savings Account (RSA) with a Pension Fund Administrator (PFA) of his choice, the PFA will issue periodic statements of account showing how much has been contributed and returns on the contributions to date.
Apart from issuing regular statements of account to all contributors, the PFAs are also expected to have on-line facilities with which employees can access their savings accounts, not just quarterly but on a 24-hour basis.
Thus, even if a contributor has a nil balance because his employer has not transferred any of the money deducted to the account; the PFA is required to send the employee a statement that indicates nil balance.
Section 45 (d) of the Pension Reform Act 2004 also requires the PFAs to provide regular information on investment strategy, market returns and other performance indicators to the National Pension Commission (PenCom) and employees or beneficiaries of the retirement savings accounts.
The rate of contribution is a minimum of seven and half per cent by the employer; and a minimum of seven and half per cent by the employee.
Contributors are, however, at liberty to make voluntary contributions to their RSA in addition to the contributions made by them and their employer.
In a similar vein, people exempted from the scheme but wish to save towards their retirement may open a Retirement Savings Account and make voluntary contributions to their RSA.
A change of job will not affect your Retirement Savings Account, as your RSA for life.
When you change jobs, you will only be required to notify your new employer of the PFA that manages your account and your RSA number and also update your employment records with your PFA. Your employer will then contact your PFA to get the details of your PFC in order to remit your contributions.
At the retirement of an employee or upon attaining the age of 50, whichever comes later, he may utilise the balance standing to the credit of his Retirement Savings Account for programmed or monthly withdrawals calculated on the basis of an expected life span or he may purchase an annuity for life from a life insurance company with monthly or quarterly payments.
The contributor can also withdraw a lump sum provided that the amount left will be enough to procure an annuity or fund programmed withdrawals that will produce an amount not less than 50 per cent of his annual remuneration as at the date of retirement.
With regards to voluntary contributions, these may be withdrawn from the RSA at any time but will be liable to tax if withdrawn within five years of the date the voluntary contribution is made.
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Adeshola
Adeshola Komolafe
Founder/Researcher
SAVE OUR FUTURE
Abuja
Nigeria
www.desholakomolafe.com
Email: adesholakomolafe@yahoo.com
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