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Job Loss: Nigerians Turn To N8.74trn Pension Fund For Succour

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Retirement Savings Account(RSA) holders disengaged or resigned from their last jobs and could not get new jobs four months after, have been assessing 25 per cent of the amount in their respective pension accounts to make a living. ZAKA ABD-KHALIQ writes.

The continuous disengagement of workers majorly in the private sector has taken its toll on the nation’s pension funds now at N8.74 trillion, as most of the workers have resorted to their pension contributions by accessing 25 per cent of their savings, LEADERSHIP can reveal.

With the harsh economy robbing off the labour market, findings show that 289,126 workers who were sacked by their respective companies were able to withdraw N98.28 billion from their pension contributions.

It was learnt that the disengaged workers made the withdrawal between 2004, when the Contributory Pension Scheme (CPS) came into effect and September, 2018.

While the cutting cost measures adopted by public and private entitles is leading to consistent loss of jobs, investigation shows that the lean prospect of finding a new job immediately after the loss of an earlier job, was responsible for increase in demand to access 25 per cent of pension contributions.

As a result, a document sourced from the National Pension Commission (PenCom) shows a huge number of 13,176 workers were disengaged in the third quarter of 2018, that is, between July and September 2018, while these disengaged workers withdrew N5.09 billion from the pension assets within this timeframe.

Of the entire disengaged workers who accessed their pension contributions, LEADERSHIP learnt that about 95.62 per cent of them were from the private sector, an indication of lack of job security in the private sector of the nation’s economy. The public sector seems to be better in terms of job security as only about 4.38 per cent of pension contributors were affected by the job loss.

The PRA 2014 allows contributors, under the age of 50 years, who were disengaged from work and were unable to secure another job within 4 months of disengagement, to access 25 per cent of their respective RSAs.

Moreover, while some firms in both public and private sectors have downsized, some are preparing to lay-off more workers in the current year, in a bid to cut their expenditure, meaning that, more workers are going to be disengaged, hence, more pension contributors will demand for 25 per cent of their RSA balance in the current year.

Some of the beneficiaries, industry sources disclosed, are investing this money in their business ideas in a bid to be self-employed, while some used it to meet their more immediate financial needs.   

The increase in the number of people accessing their pension account as a result of job loss, according to market observers, was due to the harsh economic scenario in the country, but noted that this intervention further shows the beauty of the Contributory Pension Scheme (CPS).

Experts’ Reactions

A source in the National Pension Commission (PenCom) who confided in LEADERSHIP said the increase in the number of contributors applying for the 25 per cent of their pension contributions was as a result of increase in job loss, adding that, 50 per cent of the documents PenCom processed on pension matters are actually from those demanding for 25 per cent of their pension contributions.

The source added that “That is an indication of how people are losing their jobs or are getting disengaged and having waited for about four months without getting another job, they resort to access their retirement account.”

Speaking in an interview with LEADERSHIP sometimes ago, the Managing Director, AXA Mansard Pension Fund Administrator(PFA), Mr. Dapo Akinsanya, said the job loss shows the tough time the country is passing through, noting that, the pension industry is performing one of its civic responsibility, by paying the 25 per cent pension contribution to these beneficiaries.

He said the industry is losing nothing as the investment income emanating from investment of pension assets far outweighs the payment made to these people.

Believing that this will also enhances the integrity of the new pension scheme, he added that, the pension funds has been growing irrespective of whatever payment made out of it.

Steps To Access 25% From Your Pension Account After Job Loss

Section 7 (2) of the Pension Reform Act 2014 allows a worker who voluntarily retires, resigns or is disengaged from paid employment to access 25 per cent of his RSA if he is unable to get another job after four months.

To access your Pension Funds should you decide to resign from paid employment or were sacked, you need to present to your PFA the letter of termination of appointment issued by the employer or letter of resignation, last three months’ payslips, letter from you requesting for 25 per cent payment of the RSA balance, evidence of accrued pension rights, if any, for public sector workers and bank statement or letter of introduction from the bank.

Other documents needed are; Proof of age (birth certificate or sworn declaration of age), Letter from the employer confirming full remittance of all contributions made to the RSA for the private sector worker, PenCom retiree indemnity form for public sector workers, Four passport photographs; and a form to be given by the PFA.

Your request will now undergo approval process, whereby you pension fund administrator will submit your request letter to PenCom, who will now assess the letter and decides whether to accept or decline the request.

Continuous Growth In Pension Assets

Despite this withdrawal, the nation’s Pension Fund has risen to N8.74 trillion after it rose significantly by N110 billion from N8.63 trillion as at December, 2018 to the aforementioned figure as at the end of January, 2019.

The number of contributors also rose by 5,000 from 8.41 million pension contributors in December, 2018 to 8.46 at the end of January, 2019, as more workers continue to join the new pension scheme in the country.

Of the N8.74 trillion pension assets, N6.51 trillion, representing 73 per cent of the total pension fund is invested in Federal Government Securities issued to finance various activities of government.

This consistent increase in pension assets on a monthly basis, findings show, was attributable to new pension contributions received, interest from fixed income securities and net realised on equities and mutual fund investments.

Investment income, according to LEADERSHIP investigation, was instrumental to the continuous growth in pension fund, despite the fact that government at the state and federal levels are not paying the monthly pension contributions of their workers as and when due.

The Acting Director General, National Pension Commission (PenCom), Mrs. Aisha Dahir-Umar, while speaking on this development at the weekend, stated that the Contributory Pension Scheme (CPS) has been very impactful in Nigeria since the commencement of its implementation in 2004.

To this end, she added that the formation of long term domestic capital, represented by the over N8.74 trillion worth of pension assets as at January 2019, belonging to 8.46 million formal sector participants, is slowly but surely changing Nigeria’s financial landscape.

This, by extension, she stressed, is also transforming the course and pace of socio-economic development in the country.

Noting that N6.51 trillion, representing 73 per cent of the total pension assets is invested in Federal Government Securities issued to finance various activities of Government, she said: “In the area of infrastructure alone, the pension funds invested about N95.31 billion in the N200 billion Sukuk issued by the Federal Government. Similarly, out of the N10.67 billion Green Bond issued by the Federal Government, pension funds invested N7.19 billion.”

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