Gbenga, age 45 worked in one of the medium sized deposit money banks in Lagos, as a senior manager before he resigned late last year following a major restructuring in his bank that affected more than 40 percent of the staff.

When the restructuring got to Gbenga’s department, the treasury, he was asked to resign by himself, but thinking it would mean a disgraceful exit to request his sacking, he resigned and left for his house. The bank however has since paid him his terminal benefit even though that was not enough to carry him for so long having not secured another job since then.

By his position in the bank, Gbenga had got a huge amount of money (pension fund) in his Retirement Savings Account (RSA) in excess of N13m having been enrolled in the Contributory Pension Scheme (CPS) since 2006, following the coming on board of the Pension Reform Act 2004, which was recently reversed in 2014.

When after eight months he could not secure a job, Gbenga considered raising some capital to start his own business, at least to take care of his family and pay his bills, which were gradually becoming a serious problem for him. But realising he has got some huge money in his Retirement Savings Account with one of the Pension Fund Administrators (PFAs), he was rest assured that he could get the allowable 25 percent of the amount in pension contribution as unemployment benefit.

The pension reform act provides that a holder of a retirement savings account on request, withdraw a lump sum of money not more than 25 percent of the amount standing to the credit of the retirement savings account, provided that such withdrawals shall only be made after three months of such retirement and the retired employee does not secure another employment.

On getting to the PFA the following day and presenting his request with documents as evidence that he has been out of job for a while, Gbenga was shocked when the Benefit’s offer of his PFA told him he was not suppose to resign by himself.

“You should have allowed your employer to sack you if you wanted to access this benefit because it does not take care of those who opted for voluntary resignation.” So, Gbenga wept seriously that he has committed a serious blunder to have chosen to resign himself rather than allowing his employers to sack him.

When an employee resigns, he or she cannot get 25 percent of the contribution as unemployment benefit. A lot of organisations are used to asking their staff particularly senior managers to resign rather than sacking them. It is good for the sake of pride, but note, that you cannot get the 25 percent of your pension benefits should you not secure another job after three months and need some money to take care of your bills or start up a business.

It is important that people realize this, by knowing that their employer must sack them for them to get 25 per cent of the amount standing in their RSA. If your employer tells you to resign, tell him to sack you for it is better than forceful resignation. This is called compulsory retirement.

Modestus Anaesoronye

BusinessDay

Thanks a lot for the piece of information.

This is unfortunate o! So someone can not bank on this money for private business.

KiksAsso:
Thanks a lot for the piece of information.

You are welcome

Thanks a lot for this

Insightful!

On 01 July 2014, the President signed the Pension Reform Act (PRA) 2014 into law and this repeals the Pension Reform Act 2004. The new Act will continue to govern and regulate the administration of the Contributory Pension Scheme for both the public and private sectors in Nigeria.

5 notable highlights of the Act that impacts a Retirement Savings Account holder

Upward review of the minimum rate of contribution
Section 4 (1) of the new Act reviewed upwards, the minimum rate of pension contribution from 15% to 18% of monthly emoluments, where 8% will be contributed by employee and 10% by the employer. This will provide additional benefits to employees thereby enhancing their pension benefits at retirement. 

Accessories to contributions before age 50
The Act in section 7 (2) now allows an individual who voluntarily retires, resigns or is disengaged from employment access to 25% of his/her retirement savings account (RSA) balance if he/she is unable to secure another job within a period of 4 months. This is different from what was obtainable under the PRA 2004 where only individuals who were involuntarily disengaged from employment were entitled to access 25% benefits after remaining unemployed for 6 months.

Tax on Voluntary contribution withdrawals 
Withdrawal of voluntary contributions (VC) within 5 years from the date the contributions were made is still subject to tax. However, as clarified in section 10 (4), only the income earned on the VC will be subject to tax at the point of withdrawal. 
VC that is withdrawn after 5 years from the date the contribution was made will still be tax free.

Access to Mortgage
Section 89 (2) of the Act provides that a Pension Fund Administrator (PFA) may subject to guidelines issued by the National Pension Commission, apply a percentage of the pension assets in a Retirement Savings Account (RSA) towards the payment of equity contribution for a residential mortgage by a RSA holder.