Hi guys,

I have an aunt that just retired and she's kinda confused about which method of pension fund disbursement should she go for? The most common method in Nigeria is the programmed withdrawal in which the RSA balance is pro-rated for a specified number of years (usually 15yrs + or -) based on some life expectancy statistics, the relations can also access this fund should the retiree die at any point during the payment period.

The other method is purchasing annuity which is somewhat not clear to us.

The Dilemma

The bone of contention is that he's been advised to purchase annuity from licensed insurance companies but they are telling him the payment period is for life as against the specified number of years for the other disbursement method and that in case of death, the relations cannot access the remainder of the funds.

She's got a good sum in the RSA account and she's planning to take a lump sum between 30 - 40% while leaving the balance for annuity or programmed withdrawal.

What we want to know is the pros n cons involved in annuity as it seems to be a risk on one hand should there be a early passing on of the retiree while on the other hand it'll be a worthwhile investment if the retiree lives longer.

Will it be financially wise to purchase an annuity with 5m Naira? what will be her monthly returns and what advantages does annuity seems to offer as against the usual programmed withdrawals


Excuse my naïveté if any