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There are 3 ways a retiree can access his fund,
Lump sum, programmed withdrawal and annuity. Of these three, a retiree is first and foremost interested
in his total money available to him as lump sum.
Majority of the retirees immediately became
disillusioned and sick, once they discovered that they are having only 25
percent of the retirement savings account. This is because they are ignorant of
the act and their friends who were opportune to have received 50 percent.
The pension
reform act under section 4 subsection c of the 2004 PRA states that a lump sum to the
balance standing to the credit of his retirement savings account: provided that
the amount left after that lump sum withdrawal shall be sufficient to procure
an annuity or fund programmed withdrawals that will produce an amount not less
than 50 per cent of his annual remuneration as at the date of his retirement.
And in section 7 subsection
1 paragraph a of the PRA 2014 states that withdrawal of a lump sum from the
total amount credited to his retirement savings account provided that the amount
left after the lump sum withdrawal shall be sufficient to procure a programmed
fund withdrawals or annuity for life in accordance with extant guidelines
issued by the commission from time to time.
And in arriving at the payment of lump sum to retirees, four
factors determine the size of the lump sum, and they are follows: Sex, age,
Final salary and RSA balance.
1 Sex
The application that we are using for pension has the principle
that women lives more than men , I do not know how they arrived at that but I
do know that there are more widows than widowers in my village. In an article
by Forbes, titled 15 Richest women in the world, about 13 of them inherited their
wealth from their husbands who are now late. And when I did a pilot with
National Population Commission, some years ago we also discovered that there
are more widows than widowers, it all means that Chile Application which Pencom
is using is indirectly right. Because by either the inductive and deductive
analysis in statistical research analyst, analyst have come to that conclusion.
But events surrounding women living longer than men as a normal application in
social statistics indicates that the social mobility of a woman is a straight
line and that of a man is an undulating plane. But the hustle of life and the
stress of making it in life has come to reduce the life expectancy of a man.
But what this indicates is that generally women
with the bio data with a man and retiring at the same time will definitely get
a lower lump sum and a lower pension salary than her male colleagues.
2 Age , this plays a prominent role in the
calculation of lump sum , the age at which a retiree is very essential in the
lump sum calculation, e.g. somebody that retire at the of 50 will not
definitely get the same amount with one retiring at the age of 60 or a
professor retiring at the age 65 or 70.
It’s just simple mathematics; the retiree at the
age of 50 will definitely work for ten years before his normal age retiring at
the age of 60.
3 Final salaries
The scheme noted that a retiree is entitled to 50
percent of his last salary, what then happens to a retiree on a meager salary
who suddenly finds himself with a huge salary two years to retirement.
Obviously that retiree will not have enough in his lump sum calculations. In
calculating lump sum, the salaries are needed , when it is consolidated with
one variable, two variables , they are all provided for in the computation of
final pension benefit and also in the lump sum.
4 The RSA Balance.
RSA balance is also a key factor in determining the
size of lump sum, as there a retiree with a closing balance of 3 million Naira
and a last salary of 150 thousand Naira will not be able to get 1.5 Million as a
lump sum as his total pension salary of 75 thousand will offset the pension in
a period of 20 months.
it should be noted the minimum lump sum is 25
percent and the maximum lump sum is 50 percent, and the values varies within the
range. Therefore what you get as your lump sum is a function of these 4 factors
highlighted above. It all means you can do more by engaging the services of
experts to know what to do to increase your pension pot, and until you that are
rest assured that lump sum may or may not be enough for you during retirement.
Odunze Reginald C is the Lead Consultant, Chareg
Consulting.
You can follow our anchor at twitter @regydunze,
and our Face book @Reginald odunze.com, you can also check us at
pensionsbenefit.com
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