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How pension lump sum is determined " PenOp.

Contrary to claims by some individuals that Pension Fund Administrators (PFAs) use their discretion to determine the lump sum paid to retirees, the Pension Fund Operators Association of Nigeria (PenOp) says the computation is based on a standard template that is issued by the National Pension Commission (PenCom).


The Chief Marketing Officer, Premium Pension Limited, Kabir Tijjani, who disclosed this today at the 2017 PenOp Annual Media Retreat for members of National Association of Insurance and Pension Correspondents (NAIPCO) in Abeokuta, Ogun State, stated that Section 7 (1) (a) of the Pension Reform Act (PRA) 2014 allows for lump sum to be paid to a retiree provided that the amount left after the lump sum withdrawal will be sufficient to fund a programmed withdrawal over expected life span of not far from 50 per cent of his/her annual remuneration as at date of retirement.


According to him, this therefore makes computed monthly pension drawdowns over an expected life span to be a first charge on the RSA balance while the residual will be paid as lump sum.


The Computation of the lump sum payment and periodic (monthly/quarterly) pension withdrawal is based on a Standard Programmed Withdrawal Template/Model issued by the National Pension Commission (PenCom) to all Pension Fund Administrators (PFAs).


The inputs/variables in the PWT for the computation are based on the new definition of Annual Emolument (ATE) using the most revised template for calculating lump sum benefit released by PenCom, he said.


On why there are differences in the benefits paid to retirees, he noted that the amount of monthly pension or lump sum varies for individual retires due to:-age at retirement, stressing that two retirees with different ages and other variables being equal, the older retiree will get slightly higher monthly pension than the younger retiree because his expected life span is shorter.


The mortality table assumes that women live slightly longer than men: Therefore, a male and female retiree with the same age and other variables being equal at retirement will definitely have differences in their pensions as the template makes provision for the extra years that the female retiree is expected to live.


Two retirees with different RSA Balance with other variables remaining the same as retirement will result to higher monthly pension and (or) lump sum for the retiree with the lump sum for the retiree with higher RSA balance while the reverse is the case for the retiree with the lesser RSA balance.


Differences in ATE with other variables remaining constant will cause differences in monthly pensions and lump sum receivable.


Based on individual peculiarities, one can choose between zero lump sum and/or maximum lump sum or any amount in between is equal to or lower than the recommended/maximum lump sum in the template in order to boost his monthly pension, he posited.


He noted that delay in payment of benefits is often caused by none submission of required documents, incomplete documents or error in beneficiary name, technical hitch like server downtime or bank network glitch.


According to him, differences in RSA balances are as a result of size or accrued rights portion paid into RSA due to grade level and step as at June, 2004; total monthly contribution is based on individual grade level/ structure from July 2004 to date of retirement and that the growth of the investment income is based on the duration in which the contributions stayed in the RSA.


Credit: Inspenonline

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