On November 27, 2024, the National Pension Commission (PenCom) in Nigeria announced a significant regulatory shift that positively impacts low-earning pensioners. Under new guidelines started through a memo penned by the Head of the Surveillance Department at PenCom, A.M. Salem, retirees with low earnings can now either withdraw their entire retirement savings in a lump sum or continue receiving their monthly pensions. This development aligns with the newly revised regulations concerning retirement savings and terminal benefits, particularly in connection with the recent increase in the national minimum wage from N30,000 to N70,000, as set forth by President Bola Tinubu on July 29, 2024. Before this change, pensioners were restricted to withdrawing only a third of their total Retirement Savings Accounts (RSAs).
This regulatory update serves to help individuals whose pensions fall short of at least one-third of the current minimum wage, which translates to monthly payments below N23,333.33. Section 4.1 (g) of the revised regulation stipulates that if a retiree’s RSA balance cannot yield a monthly or quarterly annuity of this amount, they can now opt for an en bloc withdrawal of their total savings instead. This measure is a direct response to the growing need for pension systems to adapt to the realities faced by retirees, particularly given the rising costs of living as evidenced by the significant increase in the minimum wage.
The memo mandates that pension fund administrators and custodians process these changes in accordance with the new regulatory framework. Specifically, the administrative instructions require that any pensioner with an RSA balance inadequate to cover the minimum threshold for pensions be presented with the choice between accessing their full retirement savings immediately or continuing to receive whatever pension amount they are currently eligible for until the new Minimum Pension Guarantee program is in place. This choice reflects a considerably more flexible pension regime aimed at offering relief to those who may have previously felt constrained by their limited access to savings.
Moreover, to facilitate the withdrawal process, several procedural requirements outlined in the memo must be followed by retirees who opt for the en bloc withdrawal. These requirements include a consent form that confirms that the pension fund administrator has properly informed the retiree about the Minimum Pension Guarantee, as well as a signed hard-copy application letter requesting the full withdrawal of their RSA balance. This structured approach aims to ensure that retirees are fully informed and consenting to their applications, thereby safeguarding their financial choices while streamlining the administrative process for pension fund administrators.
PenCom has emphasized the need for immediate compliance with this directive, highlighting the urgent nature of support for low-income retirees who may be struggling with inadequate pension payouts in light of rising costs and economic pressures. By prioritizing the needs of the most vulnerable retirees, this circular aims to engage pension fund administrators fully in creating an environment supportive of financial security and stability for all pensioners.
In summation, the recent memo from PenCom signifies a substantial shift in the landscape of Nigeria’s pension system, aiming to accommodate pensioners adversely affected by low monthly payouts. With the combination of regulatory updates and enhanced procedural guidelines, retirees now have greater flexibility regarding their retirement savings. This initiative underscores the government’s commitment to aligning pension benefits with contemporary economic realities, ultimately seeking to provide both immediate financial relief and long-term security to senior citizens in a rapidly changing financial landscape.
