Pension withdrawal in Nigeria typically refers to the process by which individuals access the funds accumulated in their pension accounts after retirement or under certain specific circumstances.
Nigeria has a formal pension system in place to provide financial security to retired individuals, and the process of withdrawing pension funds is governed by the Pension Reform Act (PRA) of 2014. The retirement age in Nigeria is generally 60 years. However, individuals can choose to retire earlier, from the age of 50, or later, up to the age of 70.
Here are some key points to understand about pension withdrawal in Nigeria:
Types of Pension Withdrawals
25% Withdrawal
A person holding an RSA (Retirement Savings Account) and being under the age of 50, who has not engaged in any paid or gainful work for at least four (4) consecutive months after leaving their job, is eligible to request a withdrawal of 25% from the funds available in their Retirement Savings Account.
This action is in accordance with the guidelines outlined in the Regulations for the Management of Retirement and Termination Benefits. This withdrawal can be made a single time, provided that the individual remains under the age of 50. However, upon attaining the age of 50 years, such an employee may then access the balance standing to the credit of his/her account as a retiree.
Withdrawal Under Voluntary or Mandatory Retirement
An RSA holder can retire upon attaining the age of 50 years old in the Federal Public Service or Private sector organisation, and can opt for any of the following benefit options as allowed under the Act or in line with the Regulations for the Administration of Retirement and Terminal Benefits:
En-bloc Payment - is applicable when the RSA balance falls below N550,000. In this case, the entire balance in the retirees’ account to be paid to the retiree en-bloc.
Lump Sum Payment - involves disbursing an amount only after ensuring adequate funding for a programmed withdrawal or annuity, which must yield an amount equivalent to at least 50 percent of the retiree's annual salary at the retirement date.
Programmed Withdrawal - encompasses a sequence of regular disbursements (either monthly or quarterly) determined by the retiree's projected lifespan, commonly referred to as the guaranteed pension period.
Annuity - acquired from a certified Life Insurance Firm. The retiree receives regular payments for life, providing a guaranteed income stream.
Death Benefits
In the event of the passing of an RSA holder, it is the responsibility of either the employer, next-of-kin, or appointed representative to inform Access about the demise of the employee or retiree. This notification must be accompanied by valid documentation confirming the death of the individual.
All entitlements owed to the deceased, encompassing life insurance policy payouts, accrued pension benefits, and amassed contributions (along with any earnings thereon), will be meticulously processed and transferred to a designated bank account held by the Executor or Administrator of the estate of the deceased individual.
Missing Persons
Should a situation arise where a retirement savings account holder is reported as missing, the employer or Next-of-Kin (NOK) is required to inform the Pension Fund Administrator following a minimum duration of 12 months. Subsequently, the National Pension Commission will initiate the formation of a board of inquiry to verify the individual's absence.
Once the board of inquiry completes its investigations and concludes that the client is presumed deceased, the designated beneficiary of the missing client, or another individual as instructed by a court with appropriate jurisdiction, shall gain entitlement to the client's RSA balance. This entitlement will be granted upon the provision of a Will that has been officially admitted to Probate or Letters of Administration.
Retirement on Medical Grounds
A retired RSA holder who is medically incapacitated, exhibiting total or permanent disability affecting either mental or physical faculties, becomes eligible to obtain complete retirement benefits, regardless of their age. They retain the option to choose from a range of benefit possibilities, either individually or in various combinations, as outlined below:
En-bloc Payment - is applicable when the RSA balance falls below N550,000. In this case, the entire balance in the retirees’ account to be paid to the retiree en-bloc.
Lump Sum Payment - involves disbursing an amount only after ensuring adequate funding for a programmed withdrawal or annuity, which must yield an amount equivalent to at least 50 percent of the retiree's annual salary at the retirement date.
Programmed Withdrawal - encompasses a sequence of regular disbursements (either monthly or quarterly) determined by the retiree's projected lifespan, commonly referred to as the guaranteed pension period.
Annuity - acquired from a certified Life Insurance Firm. The retiree receives regular payments for life, providing a guaranteed income stream.
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