No fewer than 83,568 retirees, at the point of retirement, opted for Retiree Life Annuity (RLA) plan, hence, paying a cumulative N464.53 billion premium to life insurance companies in the country, LEADERSHIP learnt.
Life annuity plan is an income purchased from an approved life insurance company which provides monthly or quarterly income to the retiree during his/her lifetime.
To this end, investigation shows that, from 2004 when the Contributory Pension Scheme(CPS) became operational, till December 31sr, 2020, the total premium transferred by Pension Fund Administrators(PFAs) on behalf of their customers, amounted to 464.53billion.
In a recent report from the National Pension Commission(PenCom) and made available to LEADERSHIP, the total number of retirees who opted for annuity plan increased from 74,805 in 2019 to 83,568 in 2020.
Further breakdown shows that federal government retirees accounted for 49,368 (59.07 per cent), the States retirees accounted for 10,494 (12.56 per cent) while the private sector retirees accounted for 23,706 (28.3 per cent) of the retirees who opted for annuity at the expense of programmed withdrawal plan.
Stating that the cumulative monthly annuity being received by retirees from inception to December 31, 2020 was N4.62 billion, after the receipt of cumulative lump sum of N127.62 billion, PenCom said, in 2020, 8,763 retirees who opted for Life Annuity received N25.92 billion as lump sum while N57.22 billion was paid as premium to insurance companies in exchange for monthly Annuity receipts of N540 million.
In the second quarter of 2021, however, the regulator granted approval to 1,708 retirees under the Retiree Life Annuity, adding that, the total lump sum of N4,586.16 million was approved for payment to the retirees.
Speaking on annuity, the managing director/CEO, Cecilia O. Osipitan, said that life annuity is a stream of periodic payments that commences at a specified date, which is either the normal retirement age or at 50 in the case of early retirement. The payment, she added, could either be monthly or quarterly depending on the retiree’s preference.
Osipitan explained that the benefits to include; the continuous flow of regular income for the retiree, insulation from the risks associated with the investment of lump-sum benefits, structured management of resources and the transference of the risk of diminution in assets and possible failure of investments of retirees to insurance companies that are better equipped to manage such risks.
“Insurance remains the most reliable bedrock of our existence and cultivating the culture of insurance can never be over emphasised. There is a need to call for a paradigm shift through effective sensitisation of the insuring public as it is very important to imbibe the culture of getting appropriate insurance cover to protect our assets and lives in case of any eventuality,” she pointed out.
Earlier, the commissioner for Insurance, Sunday Thomas, expressed optimism that a substantial part of the N13 trillion pension assets will find its way into the insurance portfolio.
NAICOM, he said, is working assiduously to put in place measures to protect the expected funds, which informed the move to train and breed actuarial analysts, who will help measure and manage insurance associated risks.
“Annuity requires day-to-day measurement and management of its activities. As I speak with you right now, annuity accounts for about 40 per cent of our portfolio. That actually requires our attention,” he pointed out.
The Retiree Life Annuity (RLA) is an insurance product and one of the available retirement benefit options for retirees. The product can be purchased from a Life Insurance Company licensed by the NAICOM and authorised to sell RLA under the regulation of retiree life annuity.