Retirement- The Concluding Part

 The major thing in planning for retirement is having a somewhat steady follow of income that can sustain your chosen life style during the retirement. That is why I always recommend a moderate, not too extravagant life style that is rich in substance and style. And to achieve this we must have saved over our working years, or have some sort of investments to fall back on. In respect to this will I  commend President Obasanjo, though he may have his own issues from your perspective, but  signing the first pension act into law, a thumbs up. In 2004 we had the first pension contribution law and it was amended in 2014. We will look at the 2014 amendment a little so as to draw our attention to the facts as this pertains to personal finance.

Before we start out with the law thing, lets me quickly ask a few questions:

Do you know if your Pension is correctly calculated and remitted?

Do you know your RSA (Retirement Savings Account) number?

Do you know your account balance?

Do you know your balance forms part of your Net worth?

Do you know you can change your PFA, if you are not getting the right service?

Can you still remember who you used as your next of kin?

Let us look at the summary of the amended law:

Pension Contribution:

It states that all employers in the public and private sector that have fifteen (15) or more employees are required under the Pension Reform Act 2014, to participate in the contributory pension scheme in favour of their employees. So if your staff strength is 15 or more and your employer is not paying your pension, they are liable and they need to pay.

Not less than 18% of monthly emoluments* (with a minimum contribution of 10% by the employer and up to 8% by the employee). The employer and/or the employee may make additional voluntary contribution. Where an employer decides to solely contribute to the scheme, the contribution shall not be less than 20% of the employee's monthly emolument.

The employer is obliged to make monthly deductions at source from the employee's emoluments and remit to the Pension Fund Custodian (PFC) specified by the employee's Pension Fund Administrator (PFA) not later than 7 working days after the payment of the employee's salary.

An employee can obtain approval from the Pension Commission to access his/her retirement savings account where the person:

•     Retires or attains the age of 50, whichever is earlier.

•     Disengages from employment before the age of 50 and is unable to secure employment within 4 months of disengagement. Here, the employee is allowed access to an amount not exceeding 25% of the funds in the retirement savings account.

•  Disengages on the advice of a suitably qualified physician certifying that the employee is no longer capable of carrying out job functions

• Disengages due to instability of mind or body or Disengages before 50 in accordance with his/her terms of employment

Another plus of the act is that requires every employer to take out life insurance cover for its employees. The sum assured should be three times each employee's annual remuneration. The insurance cost is to be borne solely by the employer.

The misappropriation of the Police pension is still fresh on our minds, but you need not be afraid as the reform act also rolled out punishment for offenders:

Misappropriation of pension funds is liable to prison term of up to 10 years or a fine of 3 times the funds misappropriated, or both. Also, the convicted person is required to refund the diverted funds and forfeit any property or fund diverted, with accrued interest. For PFCs, the Act imposes a penalty of at least N10m, upon conviction, where the PFC fails to hold the funds to the exclusive preserve of the PFA or where it applies the funds to meet its own financial obligations (in the case of a Director, N5m or a term of 5 years imprisonment or both). Any person, PFC or PFA that refuses to produce required information or produces false or misleading information is liable on conviction to a fine of not less than N200,000 or prison term of not less than 3 years, or both. A fine of N100,000 may be imposed for every day the offense continues.

Where no specific penalty is prescribed, a person who contravenes any provision of the Pensions Reform Act will be liable on conviction to a fine of not less than N250,000, or a term of not less than one year imprisonment, or both.

Defination of key terms:

Pencom- Pension Commission

PFA- Pension Fund Administrators

PFC- Pension Fund Custodians

Monthly emoluments means” total emolument as defined in the employee's contract of employment, provided it is not less than the total of the employee's basic salary, housing and transport allowance”.