PFAs pay N17.96bn to sacked workers

More sacked workers have approached their Pension Fund Administrators demanding to be paid a quarter of their savings under the Contributory Pension Scheme, NIKE POPOOLA reports

Pension Fund Administrators have paid N17.96bn to 4,119 workers who lost their jobs this year.

The money was part of the contributions made to the PFAs by the sacked while they were in service under the Contributory Pension Scheme.

A report obtained by our correspondent from the National Pension Commission on Friday indicated that the affected workers were those relieved of their jobs as of June 2014.

The amount (N17.96bn), according to the document, represented a quarter of the workers’ total contributions with their PFAs.

The details of the refunds showed that the PFAs returned N14.48bn to 2,809 workers from inception of the scheme till March this year. It later refunded N3.48bn to 1,314 other contributors between April and June, bringing the total funds to N17.96bn.

The former Pension Reform Act 2004 allowed only an employee that was sacked to access 25 per cent of his contributions after waiting for six months without getting another job.

This posed a lot of challenges for employees who were forced to resign by their employers because they could not produce evidence of being sacked to their PFAs, to qualify them for the 25 per cent withdrawal from their savings.

But after the signing into law of the Pension Reform Act 2014 whose implementation commenced in July, more contributors are expected to have access to part of their savings with the various PFAs.

Analysts have said under the new dispensation, workers now have more access to the pension funds as they no longer have to produce evidence of being sacked before they can withdraw part of their savings in the fund.

They note that Section 7 (2) under the PRA 2014 allows a worker who voluntarily retires, resigns or disengages from employment to access 25 per cent of his RSA if he is unable to get another job.

The law also reduces the waiting period of accessing this fund to four months. The essence, according to them, is to allow the worker to have some funds to live on or invest in productive ventures, pending the time he is able to have another stable source of income.

The Managing Director, Premium Pension Limited, Mr. Wilson Ideva, says under the old PRA 2004, it is not possible for the employee to voluntarily resign and demand for part of his RSA contributions.

“But the newly amended Pension Act 2014 allows for withdrawal of 25 per cent after four months without employment whether by resignation or termination,” the Premium PFA’s boss said.

The Managing Director, NLPC, PFA, Mr. Wale Kolawole, also says the PRA 2014 has amended some areas in the pension law that allow contributors to have access to their funds.

According to him, under the former law, a worker had to wait for a minimum of six months if he was disengaged from service and had not reached 50 years before he could apply for part of his RSA contribution.

“Experience has shown that the period needs to be shortened, so in the new Act, it is four months,” he says.

Another thing the new Act has also taken care of, he explains, is the issue of the mode of exit.

According to him, the criterion for the 25 per cent withdrawal is no longer dependent on if the person resigns or is sacked; as long as the contributor is out of job.

“There used to be a contention in the past. Some employees complained they were forced to resign, but the documents they had to produce would show that they resigned, and this was not allowed,” he says.

He also notes that under the old pension Act, it was assumed that before a worker could resign, he must have had something else he wanted to do if he was not up to 50 years.

“But the new Act has taken care of that because disengagement is disengagement, whether you resign by yourself or your employer asks you to go. If you stay for four months and you don’t get another employment, you can approach your PFA to take 25 per cent from your RSA account,” he says.

When he eventually retires and is up to the age of 50, he says, he can come back when the appropriate retirement benefit approach will be applied.

The total amount contributed so far by workers under the CPS being managed by the PFAs was put at N4.57tn as of October 2014.

According to PenCom’s record, the funds rose to N4.58tn in September, but dipped to N4.57tn in October.

The latest statistics from the commission also show that workers contributing to the Retirement Savings Account were 6.1 million by the second quarter ending.

The Director-General, PenCom, Mrs. Chinelo Anohu-Amazu, says the CPS has generated a pool of long term investible funds that are found to be attractive to fund managers, investment advisers and capital market operators who need part of the funds for different purposes.

According to her, the Pension Reform Act has ushered in a uniform CPS for workers in both the private and public sectors.