Why low-income pensioners can withdraw all savings – PENCOM

Pension systems

Low-income pensioners in Nigeria on December 2, 2024 were notified through a memo that they can withdraw their entire retirement savings at once or continue receiving their monthly pensions while awaiting the introduction of a Minimum Pension Guarantee.

According to Diaspora Digital Media correspondent (DDM) an announcement was made by the National Pension Commission (PENCOM) in a memo signed by A. M. Salem, Head of the Surveillance Department.

The memo, dated November 27, 2024, states that this new policy aligns with section 4.1 (g) of the revised regulations governing retirement and terminal benefits, which reflects the recent increase in the national minimum wage from N30,000 to N70,000, as signed into law by President Bola Tinubu on July 29, 2024.

Previously, retirees could only withdraw one-third of their total Retirement Savings Accounts (RSAs).

The new regulation allows retirees whose monthly or quarterly pensions fall below N23,333.33 (one-third of the new minimum wage) to opt for a full withdrawal of their RSA balance or continue receiving their current pension payments.

PENCOM has issued a memo detailing the steps retirees must follow to withdraw their savings in one lump sum. Retirees need to submit a consent form that confirms they have been informed about the Minimum Pension Guarantee, along with a signed application letter.

The memo emphasizes the need for compliance with these new directives, which take immediate effect.

The statement regarding low-earning pensioners being allowed to withdraw their total retirement savings at once or continue receiving their monthly pension pending approval of a Minimum Pension Guarantee refers to recent regulatory changes or financial policy adjustments aimed at supporting vulnerable retirees.

Below, is provided a detailed breakdown of the implications and context surrounding this development by the PENCOM

Pension systems: Addressing the challenges faced by Low-Earning Pensioners

Pension systems in numerous countries are designed with several components, including mandatory contributions from employees and employers, supplemental retirement savings plans, and government-funded pensions.

These systems aim to provide retirees with benefits based on their lifetime contributions.

However, a significant challenge remains for low-earning pensioners, who often struggle with inadequate retirement savings, escalating healthcare costs, and inflation.

Many are forced to rely on modest pension payments, which frequently fall short of covering their basic living expenses.

The gap between received pensions and the actual cost of living is especially pronounced in regions facing economic hardships.

In response to these financial difficulties, a new policy has been introduced to allow low-earning pensioners access to their savings to address urgent needs.

While this policy is intended to provide immediate relief, it raises concerns about the potential impact on the stability of pension funds and underscores the importance of financial literacy for retirees making these critical decisions.

PENCOM, established under the Pension Reform Act of 2004, continues to oversee and regulate pension matters in Nigeria, ensuring the proper management of pension funds and adherence to established guidelines.

The Pension Reform Act 2004 established the National Pension Commission (PenCom) as the body to regulate, supervise and ensure the effective administration of pension matters in Nigeria.

The functions of the Commission include:

Regulation and supervision of the Scheme established under the Act.

Issuance of guidelines for the investment of pension funds.

Approving, licensing, regulating and supervising pension fund administrators, custodians and other institutions relating to pension matters as the Commission may, from time to time, determine.

Establishing standards, rules and guidelines for the management of the pension funds under the Act.

Ensuring the maintenance of a National Data Bank on all pension matters.

Carrying out public awareness and education on the establishment and management of the Scheme.

by Chukwu Gift Obianuju

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