PenCom empowers retirees with new lump sum access, tech-driven reforms

The National Pension Commission (PenCom) has rolled out a series of transformative measures aimed at enhancing retirees’ access to their Retirement Savings Account (RSA) balances.

These initiatives allow retirees to access a significant portion of their RSA balance as a lump sum, provided they have used part of the funds to secure pension benefits that meet at least 50 per cent  of their final salary before retirement. This reform enables retirees to withdraw up to 70 per cent  of their RSA balance as a lump sum if their monthly pension meets the required threshold.

Speaking at the PenCom Journalist Workshop in Lagos, themed “Tech-Driven Transformation: Shaping the Pension Landscape,” Omolola Oloworaran, PenCom’s director-general, shared insights on these groundbreaking measures.

According to Oloworaran, PenCom’s revised program withdrawal template aims to simplify access to voluntary contributions and adjust the en-bloc payment threshold in line with the new minimum wage. “These steps are designed to streamline the retirement process, making it more efficient and user-centric,” she explained.

One significant change, according to Oloworaran, is the removal of the previous cap on lump sum withdrawals, which was limited to 50 per cent  of the RSA balance. With this adjustment, retirees who have sufficient funds will be able to access a larger lump sum.

“The revised Programmed Withdrawal Template Version 2 provides retirees with the ability to withdraw a lump sum from their RSA balance, ensuring that the amount left after the withdrawal is enough to procure an annuity or fund a programmed withdrawal that will cover at least 50 per cent  of their annual remuneration at retirement,” she stated.

Oloworaran further emphasised that the new guidelines remove the age limitation on lump sum withdrawals, now allowing retirees aged 65 and above to access their benefits. “This new rule applies to employees retiring under the Contributory Pension Scheme (CPS) who have not been programmed as of the release date of the revised template,” she noted. She added that the guidelines also cater to retirees who opt for either the programmed withdrawal or the Retiree Life Annuity (RLA) option at retirement.

The revised guidance also offers a standardised procedure for Pension Fund Administrators (PFAs) to calculate retirement benefits, including lump sums, monthly or quarterly pensions, and arrears. “This new approach takes into account variables such as age, gender, final salary, RSA balance, and adjusted mortality tables, ensuring a fair and accurate calculation of retirement benefits,” Oloworaran explained.

Oloworaran also discussed PenCom’s commitment to using technology to modernise the pension landscape. “The theme of this workshop, ‘Tech-Driven Transformation,’ highlights the role of technology in shaping the future of pensions. Technology is a vital tool that is transforming every sector, and the pension industry is no exception,” she stated.

 According to her, PenCom has embraced this transformation wholeheartedly, with over 10.5 million contributors and pension assets exceeding ₦21.9 trillion as of October 2024.

While acknowledging the progress made, Oloworaran also pointed out some ongoing challenges. “Inflation continues to diminish the purchasing power of pensioners, and we are actively seeking innovative solutions to counteract this,” she noted.

Additionally, she highlighted the issue of delays in the payment of accrued rights, a problem that PenCom is working to resolve with the federal government. “Recently, ₦44 billion was allocated in the 2024 budget to settle accrued pension rights for retirees from March to September 2023,” Oloworaran revealed. “We are committed to working with the government to ensure retirees receive their benefits without delay or undue stress,” she added.

Reflecting on PenCom’s achievements, Oloworaran noted that her team has focused on strengthening compliance, improving service delivery, diversifying pension assets, and expanding pension coverage to include more Nigerians, particularly those in the informal sector. “We are especially passionate about the micro-pension initiative. It’s about ensuring no one is left behind, regardless of their income level,” she explained.

She further emphasised the role of technology in driving this initiative, from mobile enrollment to real-time account management and benefits administration. “We plan to leverage technology to scale up the micro-pension plan and reach even more Nigerians,” she affirmed.

In addition to the micro-pension initiative, PenCom has introduced several other technological advancements. “In October, we launched the e-Application Portal for Pension Clearance Certificates (PCC), replacing the previous manual process. Since its launch, over 38,000 PCCs have been issued, significantly enhancing compliance and streamlining business operations,” she said.

Furthermore, the Pension Industry Shared Service Initiative, currently in the advanced stages of implementation, aims to digitise pension contributions and remittances, ensuring seamless processing and reducing discrepancies in contribution records.

Oloworaran further stressed the human impact of PenCom’s initiatives. “What excites me most about our work is the ability to transform lives,” she said, adding  “Every time I meet a pensioner living comfortably because of the contributions made during their working years, it reaffirms why we do this. Similarly, hearing from young entrepreneurs or artisans who have signed up for the micro-pension scheme strengthens my belief that we are headed in the right direction.”