Retiree Fund Management

When an employee ceases to make contributions into his RSA account as a result of mandatory or compulsory retirement, or retirement on medical grounds or death, he may access the balance in his/her account. Under the grounds of mandatory retirement, (that is, when an employee disengages from active service at the retirement age or completion of the length of service based on the terms of his/her employment) upon attaining the age of 50 years, the employee is at liberty to choose between programmed withdrawal offered by Sigma Pensions, or annuity (offered by Insurance Companies). Where an employee opts for programmed withdrawal, his RSA account is transferred to the Retiree Fund. However, where an employee opts for annuity as against programmed withdrawal, the balance standing to the credit of his RSA is transferred to an Insurance Company of his choice.

Benefit payment is the whole idea of receiving payments out of the balance standing to the credit of your RSA. The RSA balance is made up of contributions into the account and the investment returns that have accrued thereto over time. Benefit payment is not limited to payments from the Retiree Fund as some benefits are paid out from the RSA Active Fund under certain circumstances.

Benefit payment can come in the form of programmed withdrawal, en-bloc payment, Pre-Scheme/legacy, withdrawal of Voluntary contributions, 25%-lump-sum payment, death benefit payment and payment of insurance proceeds.

We provide benefit payment services for defined benefits and defined contributions to more than 20,000 retirees on a monthly basis. In the case of approved existing schemes, we streamline payment processing by providing the flexibility, accuracy and operational efficiencies that plan sponsors seek.

It is important to note that the new pension scheme is designed to encourage savings during an employee’s active years. Consequently, when a contributor is no longer employed due to compulsory retirement but is capable of being employed again, he is encouraged to seek another employment rather than access the balance in his RSA. To this end, a portion of his contributions can only be accessed after some time has elapsed and under certain circumstances if such benefits are necessary to keep him/her employed again. This way, pension contributions are held to ensure a happy retirement at old age.

Where a retiree opts for programmed withdrawal, an amount representing his/her periodic withdrawal shall be determined by Sigma and approved by PenCom before such account is transferred to the Retiree Fund database. Determination of programmed withdrawal amount is done in accordance with guidelines issued by PenCom, giving consideration to issues such as age of the retiree, his last salary and amount standing to the credit of his RSA account prior to being transferred to the Retiree Fund database.

Upon receipt of PenCom’s approval of programmed withdrawal arrangements, Sigma and the Retiree jointly execute the Programmed Withdrawal Agreement, stating terms and conditions of the programmed withdrawal. A programmed withdrawal agreement is a precondition to the payment of the periodic programmed withdrawal.

Every Retiree is entitled to a choice of receiving a lump sum from his account upon retirement. Such lump sum shall be a factor of the Retiree’s age, last salary prior retirement and amount standing to the credit of his RSA. Using a standard template issued by PenCom, the Employee’s lump sum and programmed withdrawal are determined and presented for approval to PenCom. The Lump sum may, however, not exceed 50% of the balance in the employee’s account at the time of retirement.

Once the programmed withdrawal amount and the lump sum is determined and approved by PenCom and the programmed withdrawal agreement is executed by Sigma and the Retiree, he is ready to commence receipt of his periodic payments. The whole process involved in initiating and consummating the steps so far described, starting from when the retiree notifies Sigma and concludes at when the necessary approvals are consummated, should ordinarily not exceed six months.

When an employee retires from active service, the balance standing to the credit of his/her account is applied in the determination and payment of his retirement benefits during his retirement. However, where such balance is not more than N550,000, the retiree is considered not to have saved enough during his active years, and his/her RSA balance is enough to cater for the pension payments. In such a case, the Act allows for the entire balance in the Retirees’ account to be paid to the retiree, en-bloc, to enable him/her start up a business and thereby sustain his/her old age.

When an employee is compulsorily retired from employment before attaining the age of 50, he is expected to take up another employment and continue to make contributions into his RSA. However, if after a period of six months has elapsed and such employee is unable to secure another employment, he/she is entitled to access 25% of the RSA balance to enable him start up a business and thereby remain sustain and possibly resume contributions into his/her RSA. 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.

Where an RSA holder is deceased, the employer or next-of-kin or the representative shall notify Sigma of the death of the employee/retiree, providing evidence of death of the employee/retiree. All benefits due to the deceased including the proceeds of his life insurance policy, accrued pension benefits and accumulated contributions (plus income thereon) shall be processed and credited into his RSA.

Once a notification of death of an employee or retiree or report of a missing person as explained above has been received, the RSA of such person shall be deactivated to facilitate the determination and updating of all applicable benefits. After all necessary procedures have been concluded, the consolidated benefit of the deceased person shall be applied in the payment of the deceased person’s death benefits.

In doing this, Sigma shall with the approval of the Commission as to every detail, request our PFC to disburse the consolidated balance on the RSA to a designated bank account of the Executor/Administrator of the deceased’s estate.

This is the proceeds of life insurance policy maintained in favour of the employee by the employer for a minimum of three times the annual total emolument of the employer under section 9(3) of the PRA 2004. As earlier mentioned, the benefits of a deceased person who died in active service shall include among other the proceeds of life insurance policy, and this shall form part of the consolidated balance in the RSA account which shall, in turn, be paid to the deceased person’s estate.