The National Pension Commission has said it will raise the pensions of retirees who opt for programmed withdrawal and are being paid by the Pension Fund Administrators this month.
The Acting Director-General, National Pension Commission, Aisha Dahir-Umar, said this when the commission submitted a memorandum to the Senate Committee on Establishment and Public Service at the public hearing on a bill for an Act to amend the Pension Reform Act, 2014, to provide for definite percentage a retiree can withdraw from his Retirement Savings Accounts and for other matters related thereto.
She, however, stated that some retirees would not be entitled to the increase due to low balances in their RSAs.
Dahir-Umar said, “Indeed, the commission has just concluded an exercise to increase the monthly pension of all retirees on programmed withdrawal due to the income earned on investing their pension assets.
“The outcome of this exercise showed that 30 per cent of the retirees would not benefit from the increase due to insignificant income earned on the small balances in their respective RSAs.”
The commission faulted the proposal for the payment of 75 per cent of the balance in the RSAs as lump sums to retirees.
It added that the proposed amendment would mean leaving only 25 per cent to be spread over the retirees’ lifespan, which might be longer than 20 years, and that this would mean giving them a meagre monthly pensions below the current replacement ratio of a minimum of 50 per cent of the last pay.
The commission said it was doubtful if the 25 per cent balance in a retiree’s RSA, after deduction of the 75 per cent lump sum, would, if spread through the retiree’s expected life span, be adequate to reasonably cater for his livelihood during old age.
“This proposal is never the case in all jurisdictions operating the Contributory Pension Scheme the world over,” Dahir-Umar stated.
Another implication of this proposal, she added, was that in the near future, there would be huge cries for the government to provide more funds for pension payment to augment the meagre amounts to be taken as monthly stipends if the proposed bill sails through.