LIFE after retirement has remained a major concern to the average worker especially in a country like Nigeria where there appears to be no functional provision for social security for the aged.
Concerned about this social lapse, the Federal Government in 2004 put in place a pension system that would address the issue of pension administration which hitherto was treasury funded and rather than address the problem, was causing more damages and embarrassment to the nation occasioned by quantum loot and mismanagement of pension funds by the then pension managers.
The Pension Reform Act 2004 as amended gave birth to what is now known as Contributory Pension Scheme (CPS), away from the then Defined Benefits Scheme (DBS). The scheme provides for retirement saving options geared at putting a retiree on monthly income even after he or she must have retired from active service. The options are the Annuity for Life and Programmed Withdrawal (PW). While Life Annuity is provided by Life Insurance Companies licensed in Nigeria, PW service is provided by the Pension Fund Administrators (PFAs).
According to experts, annuity is a retirement plan that guarantees income for life. This implies that when a person takes an annuity plan he is paid an actuarially determined amount of money monthly or quarterly, depending on an agreed terms with the annuity service provider, until death do him or her apart and the contract agreement terminates at the demise of the pensioner.
On the other hand, Programmed Withdrawal provides a retiree with guaranteed income for a period between 10 and 15 years and within this period if death occurs; the balance in the PW is paid to dependant of the deceased.
Terms and conditions of both transactions are clearly stated in part 3, Section 7(1) of the Pension Reform Act 2014 as amended; that a holder of retirement savings account (RSA) shall upon retirement or attaining the age of 50 years, whichever is later , utilize the amount credited to his retirement savings account for the following benefits;
“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.”
“Programmed monthly or quarterly withdrawals calculated on the basis of an expected life span”
“Annuity for life purchased from a Life Insurance Company licensed by the National Insurance Commission with monthly or quarterly payments in line with guidelines jointly issued by the Commission and National Insurance Commission (NAICOM).”

In a simple note:
Programmed Withdrawal is an option that is calculated on an expected life span, meaning that the pensioner will be paid on a regular basis for a fixed number of years. After which he ceases to earn further income from his PFA. While Annuity will be paid on a regular basis by the insurance company to the pensioner until he dies". If you were retiring now, which option would you prefer and why? Secondly, if you have people retiring now, how would you advise them? Remember, retirement is expensive, but old age is more expensive.

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Adebiyi Oludare Joshua
Business Associate
Leadway Assurance Limited.