In a recent development, the National Pension Commission (PenCom) has introduced a significant change in the administration of retirement benefits, particularly for low-income pensioners. According to a memo issued by the Commission on November 27, 2024, retirees with low retirement savings can now withdraw the full balance of their Retirement Savings Accounts (RSAs) in a lump sum (en bloc). Alternatively, they can continue receiving their monthly pension, pending the approval of the Minimum Pension Guarantee.
This change follows the enactment of the new National Minimum Wage Act, signed into law by President Bola Tinubu on July 29, 2024, which increased the national minimum wage from N30,000 to N70,000.
Key Points of the New Regulation
The updated Section 4.1(g) of the Revised Regulation on the Administration of Retirement and Terminal Benefits stipulates that if a retiree’s RSA balance is insufficient to provide a monthly pension or annuity equivalent to at least one-third of the current minimum wage (N23,333.33), the retiree will be allowed to access their entire RSA balance.
Before this change, retirees were only permitted to withdraw one-third of their total RSA balances, a rule that is no longer applicable to those whose savings fall below the threshold required to generate a pension of at least one-third of the minimum wage.
What This Means for Retirees
Under the new provision:
Retirees whose monthly or quarterly pension falls below N23,333.33 (one-third of N70,000) are now given the option to either:
Withdraw the full balance of their RSA en bloc.
Continue receiving their monthly pension until the implementation of the Minimum Pension Guarantee.
The decision is left to the retiree, allowing for more flexibility in managing retirement savings. However, retirees opting for the lump sum withdrawal will need to complete the necessary documentation, including a consent form and a signed application letter. These documents must then be submitted to PenCom for approval.
Steps for Pension Fund Administrators
PenCom has instructed Pension Fund Administrators (PFAs) to:
Process retirement benefits using the current national minimum wage of N70,000.
Ensure that retirees whose pensions fall below the threshold are informed about their options and the implications of withdrawing their RSA balance in full.
Submit the required documents to PenCom for approval of lump-sum withdrawals.
This change is effective immediately, and all pension administrators are expected to comply fully with the new directive.
Conclusion
This new policy marks a significant shift in the way low-income retirees can access their pension benefits, providing them with more control over their savings. By aligning pension payouts with the updated minimum wage, PenCom aims to provide greater financial security to retirees whose savings fall short of sustaining a viable monthly pension.
