By Anthony Otaru, Abuja
Determined to right the wrongs of the past, the National Pension Commission (PenCom) has, within a short time, put up unrelenting efforts to make life more comfortable for retirees and pensioners across the country.
To achieve this feat, the commission introduced the Voluntary Contribution (VC) concept, which allows workers to increase their retirement income or earnings.
Similarly, in compliance with the Money Laundering Act (MLA) 2011 and requirements from the National Drug Law Enforcement Agency (NDLEA), the Pension Reform Commission (PRC) must report any single voluntary contribution lodged of N5m and above.
President Bola Tinubu’s administration is implementing these and other measures to improve the lives of senior citizens.
Experts have acknowledged that, in better terms, the voluntary contribution is a non-mandatory input remitted into an employee’s retirement Savings Accounts (RSA) through the employer.
“It allows employees to make additional contributions beyond the mandatory contributions set by law- minimum of 10 percent from employers and eight percent from employees,” one of the contributors who craved anonymity told ThisNigeria over the weekend.
However, others argue that this only highlights the dos and don’ts and benefits of the Voluntary Contribution Scheme as it applies to retirees and pensioners in the country today.
Experts and industry moguls also note that the new wave of pension reform has added to the issue of flexibility in making contributions.
“Voluntary Contribution offers contributors the flexibility to decide the amount and frequency of their contributions,” analyst Kunle Ogungbemi says, adding, “This is because it may be made monthly, quarterly, bi-annually or annually.”
Ogungbemi added, “Contributors can start and stop their contributions at their convenience and increase or reduce the amount as needed.
It has been gathered that Voluntary Contributions are now available to workers, including retirees, under the defunct Defined Benefit Scheme (DBS) and those under the CPS who rejoin service on contract.
“Similarly, workers in the private sector belonging to Closed Schemes or Approved Existing schemes can also make Voluntary Contributions.”
Experts say the remitted funds into RSA are segregated into contingent and fixed portions.
“The contingent portions, which constitute 50 per cent of the VC, are available for withdrawal by the contributions, provided the contributions have remained in the RSA for a minimum period of two years.
“On the other hand, the fixed portion, also comprising 50 per cent of voluntary contributions, can only be accessed by the RSA holder at retirement,” another industry guru, Maxwell Adeagbo, confides.
He added, “This fixed portion significantly bolsters an employee’s pension and lump sum upon retirement.”
Since the CPS was inception in February 2024, reports say 51,443 RSA holders have withdrawn at least N43.34trn from their voluntary contributions.
As per the accumulation of pension savings enhancement, notice has been taken that voluntary contributors make it easier for individuals to rapidly build up their pension savings during their working years, helping them meet retirement income goals.
“Employees are free to decide the level of contributions required to reach their target income at retirement. Those with specific income targets can seek advice from their Pension Fund Administrators (PFAs).
Furthermore, the ‘pension calculator,’ available on most PFA websites, can project the amounts required to be saved to attain specified retirement income targets.
Another commentator spoke at a public forum, observing, “With VC, employees can significantly boost their retirement income by making additional contributions to their savings.
“Individuals can also harness the power of compounding interest over time, thereby enhancing the size of their retirement benefits when they exit active service.
The Tinubu administration is also credited with creating tax incentives that ensure that all the income accruing to the VC investment is not taxable, especially if the withdrawal is made five years later.
“In addition, if individuals withdraw their VC after five years, no tax will be applied to the amount withdrawn. This provision further enhances the RSA balances towards higher retirement incomes.”
As it is, public education is being harped as the panacea to solving issues relating to voluntary contributions.
“Eligible individuals are expected to notify their employers in writing of their intention to make Voluntary Contributions, specifying the desired amount to be deducted.
“Meanwhile, the amount cannot exceed 1/3 of the employee’s monthly salary, according to the Labour Act of 1990. Employers are responsible for remitting the Voluntary Contributions to the employee’s existing RSA.
“Failure to remit the contributions after deductions will result in penalties as specified in Section 11 (7) of the Pension Reform Act (PRA), 2014.”
Thus, the government now requires that all VCs and mandatory contributions be managed by PFAs and held in the Pension Fund Custodian (PFC) custody.
According to PenCom, the country’s regulatory pension body, “The PFAs invest and manage the Voluntary Contributions in strict compliance with the regulations issued by PenCom governing pension funds and assets.
“Similarly, in compliance with the Money Laundering Act (MLA) 2011 and requirements from the National Drug Law Enforcement Agency (NDLEA), any single Voluntary Contribution lodgement of N5m and above must be reported by the PRC.
“From the preceding, there’s no gainsaying that the Voluntary Contributions, in line with the CPS, represents a formidable approach towards advancing retirement planning and financial security for interested Nigerian workers.
“With its flexible nature, Voluntary Contributions is in no small measure playing a critical role in assuaging Nigerian workers’ fears and doubts at retirement.”
