Why we reduced 50% lump sum payable to retirees — PenCom
The National Pension Commission (PenCom) says the 50 per cent lump sum payable to retirees as gratuity on retirement from their Retiree Saving Account (RSA) was reduced to enable them to earn at least 50 per cent of their last monthly salary as pension.
The spokesperson for PenCom, Mr Peter Aghahowa, made the clarification at the ongoing Pre-retirement Workshop for 2019 retirees on Tuesday at the University of Lagos.
More than 1,500 public servants from the ministries, department and agencies including employees from the academia and the Nigerian Railway Corporation (NRC) attended the workshop.
Aghahowa said the move became necessary following complaints by retirees that their monthly pension was too meagre to meet their obligations.
“Initially, retirees were entitled to 50 per cent of their RSA as lump sum (gratuity) after retirement but because of complaints by retirees, PenCom reviewed the template to enable the retiree get 50 per cent of his last salary on retirement as his monthly pension.
“The monthly 50 per cent pension is calculated and deducted from the RSA and the balance is what is paid as gratuity to a retiree.
“It is important to understand that lump sum as gratuity means low pension while big monthly pension means low gratuity,” he explained.
Aghahowa said the percentage of the balance paid as gratuity could vary depending on the amount left after the retiree’s monthly pension had been taken care of.
According to him, the 50 per cent lump sum was reviewed by the commission in May this year through a revised template to Pension Fund Administrators (PFAs) to ensure that the retiree gets 50 per cent of his last salary on retirement for some years.
On deductions from a retiree’s contribution, Aghahowa said PenCom could not “willfully deduct” from a retiree’s RSA balance, except on exceptional cases.
He said a retiree’s RSA balance could be deducted if the retiree’s contribution was wrongly computed.
“This denotes that the retiree was overpaid based on the initial document he submitted but on verification of his document, some irregularities were discovered.”
To ensure sanity in the system, Aghahowa said the commission would continue to monitor the PFAs and the Pension Fund Custodians (PFCs) effectively.
He added: “The commission inspects the PFAs and PFCs two times in a year and receives their investment returns daily or weekly.
“The commission could sanction or withdraw the operating licence of any PFA or PFC that errs.”
Mrs Ifedapo Akinniyi, the Manager, Benefits and Insurance at the commission, said retirees whose RSA balance could not guarantee 50 per cent of last monthly salary on retirement could get a minimum of 20 per cent as lump sum.
The Principal of Kings’ College, Lagos, Mr Kolawole Isaac, who spoke on behalf of 2019 retirees, commended PenCom for organising the pre-retirement workshop.
He, however, decried a situation whereby pensioners wait for up to two years before receiving their gratuities.
He recalled that some retirees had died before their gratuities were paid because they lacked funds to meet their daily obligations, including medical expenses.
Isaac pleaded with the commission to give the Federal government a “hot chase” to ensure that pensioners’ accrued benefits before the 2004 Contributory Pension Scheme and government’s contributions were released promptly and paid to retirees. (NAN)