The need for Additional Voluntary Contribution and its Positive impact on the Life of the Retiree-ODUNZE REGINALD

The idea of additional voluntary contribution stems from the inability of the pension pot to take care of the pension’s expectations, expenditures, medical expenses and other issues arising from the pension contributions.

Most retirees often discover that their pension Pot is not enough to carry them through  and that bring us to the idea of voluntary contribution. Most retirees develop one problem or the other when they discovered that their pension pot is not enough to carry out coupled with the rising cost of living and the sudden realization that the money they saved will not be able to cater for their old age.

Old age is what people pray for  right from their upward age of 15 years and I wonder why people feel terrible uncomfortable on advancing old age. The result has been that bleak rather than happiness.

And according to Richard Evans in an article in the Telegraph Newspaper he noted that “more than a million people have started a self-invested personal pension or Sip since their introduction in 1989, although many run their Sipp with help from a financial adviser.
These plans offer a simple and tax-efficient means to save in a wide variety of investments, from shares and bonds to cash and even, for more sophisticated investors, assets such as commercial property.”

The pension Reform Act 2004 and the pension Reform Act 2014 was explicit on that and it states in section 9 subsection 5 , Any employee to which the act applies may in addition to the total contribution being made by him and his employer make voluntary contribution to his retirement savings account.

The need for voluntary contribution came as a result of the insufficiency of pension contribution and the inability of some private sectors to pay accrued pension rights. The need for accrued pension stems out of the desire of the Federal Government to cater for the period preceding 2004, where an employee have put in number of years to the organization. But a situation where the organization what do the retiree do,  of course nothing , but if there is additional voluntary contribution , it can take of any shortfall in the expectation   of the retirees pension pot.

Retirees should make it as a duty to check their pension from their Pension Fund Administrators or they make online pension calculator which has in built mechanism capable of calculating the contributor’s likely expected values and returns

In voluntary contribution, the amount is irrelevant, it is better to start small, so that you don’t feel unsafe especially when your salary is meager, and couldn’t carry through you through.

Culled from REGINALD ODUNZE.COM

Maintaining a low profile life as a pre requisite for a happy Retirement-Odunze Reginald C

Image credited to Telegraph.

According to research, people tend to adhere to the good things of life, psychology calls it hedonistic tendency.  But adhering to the good things of life has its positive and negative implications; there is always an opportunity cost.

In financial and retirement planning, maintaining a lower life style is the key to survival. People tend to look for the good things of life, a big car, a big house, designers cloths, gold and diamond accessories etc, the list could be endless but they do not they are buying liabilities instead of assets.

That is contrary to the mindsets of rich and wealth people in our society , wherever they are ,  we discovered that  a lower percentages of the  rich are more likely to spend less on frivolities than the percentage of poor, may be they understood the value of money, or they do not want go back to that poverty state. As the late MKO Abiola said that he was so poor that when he finally became rich, he has to be working so hard so as not go back to the former state.

In The Millionaire Next Door, authors Thomas J. Stanley and William D. Danko find that millionaires were more likely to drive a Ford than a Lexus or Mercedes.
“Many affluent respondents take joy in driving vehicles that do not denote so-called high status. They are more interested in objective measures of value. Some millionaires do spend considerable dollars for top-of-the-line luxury automobiles. But they are in the minority.”

But is it wise to embark on frivolous spending especially during retirement, from the little experience and my encounters with retirees spanning a period of seven years, I discovered that those retirees on frivolous spending usually end up miserable.

According to Emily Brandon in an article captioned   “8 tips for people who will retire in 2015-Emily Brandon”  “What you decide to do in retirement will have a big impact on your costs and quality of life.  "Certainly you will spend less on gas and don't have to spend as much on work clothes, but some people are also going to spend more money now because they have the time and don't just want to sit around the house," says Craig Schmith, a certified financial planner in Durham, North Carolina. "If you've got pent-up demand to travel, especially internationally, and you haven't had time to do that, you need to think about budgeting that in."

In Africa and especially Nigeria, majority of the retirees may also likely spend their money in election related expenditures, like sponsoring candidates, that is good development especially if the candidate wins but what about the disaster of failing election, the psychological effect  of loosing election, and the money involved , therefore  it will be wise for the retiree to check fully well before embarking on it as it will have a big impact in your budget. Some will also go ahead in spending their hard money to contest elections that is a good development because Abraham Lincoln once said that “Politics is too good a vocation to be left entirely to politicians” but what we are saying is that you need to think about budgeting that is involved and the impact it will have on your standard of life.

What you decide to do in retirement will have a big impact on your costs and quality of life and the earlier you realized that the better for you.

Odunze Reginald C is the Lead Consultant, Chareg consulting.

Pension assets rise by N160bn in four months-Nike Popoola

Director-General, PenCom, Mrs. Chinelo Anohu-Amazu

Total assets under the Contributory Pension Scheme, which are being managed by the Pension Fund Administrators, rose by N160bn from June ending to October.

Figures obtained by our correspondent from the National Pension Commission on Monday revealed that the pension funds which stood at N4.41tn in June rose to N4.45tn in July.

According to PenCom’s record, the funds rose to N4.58tn in September, which however dipped to N4.57tn in October.

The commission also disclosed that workers contributing to the Retirement Savings Account rose from 5.9m at the end of 2013 to six million in the first quarter of 2014 and 6.1million in the second quarter.

The Director-General, PenCom, Mrs. Chinelo Anohu-Amazu, said the CPS had generated a pool of long term investible funds that were attractive to fund managers, investment advisers and capital market operators who wanted to access part of the fund for different purposes.

According to her, the Pension Reform Act has ushered in a uniform Contributory Pension Scheme for workers in both the private and public sectors.

She said its implementation which started in June, 2004 reformed the crisis-ridden defined benefit pension schemes in the country.

“Before then, the huge and increasing pension liabilities in the public sector needed to be addressed while most workers in the private sector were not covered by any form of retirement benefit scheme,” she said.

She noted that the inefficient administration of pension schemes and demographic shifts made defined benefit scheme unsustainable.

She said the amendments to the pension law were to take care of shortfalls in coverage, address supervisory and enforcement challenges, correct anomalies in the taxation of pension assets and enable the disbursement of the pension funds to develop infrastructure.

According to her, there is a need to criminalise fraudulent diversion and conversion of retirement savings of workers and retirees and bring the pension reform law in tune with current developments.

This, she added, necessitated a change in the strategy with a view to exploring new investment windows for pension funds among other things.

Anohu-Amazu said the accumulated pension assets in custody of Pension Fund Custodians were being privately managed by PFAs while PenCom regulates and supervises pension operators.

Culled from Punch