National Pension Commission has kicked against the suggested payment of “at least 75 per cent’’ lump sum to retiring workers under the Contributory Pension Scheme.
PenCom’s Director-General, Aisha Dahir-Umar, says implication of the suggestion is that a retiring worker can decide to take 100 per cent of the money in his or her Retirement Savings Account (RSA).
“It is important to note that the payment of 75 per cent of RSA balance as lump sum upon retirement is not obtainable in other jurisdictions operating the CPS.
“This is due to its resultant effect of rolling back the principal objectives of the CPS,” she said.
Suggestion on the 75 per cent lump sum was made in the Pension Reform Amendment Bill currently before the National Assembly.
But Mrs Dahir-Umar said the suggestion was based on a misunderstanding of the concept of pension payment under the CPS.
She argued that the proposed amendment also contravened the 1999 Constitution, which guaranteed the right to pensions for all public officers.
“That suggestion also converts the CPS into a Provident Fund and leaves such a retiree with no periodic pensions, contrary to the requirement of Section 173 of the 1999 Constitution,’’ she said.
Mrs Dahir-Umar expressed her views in a presentation at a public hearing organised by the House of Representatives Committee on Pensions.
The hearing focused on a Bill for an Act to amend Section 1(c) and Section 7(2) of the Pension Reform Act 2014.
“It is inaccurate to suggest that there is a fixed lump sum for all retirees; rather the lump sum is determined after securing a minimum replacement ratio of 50 per cent of last pay as monthly pensions,’’ she said.
The PenCom boss observed that the proposed amendment would amount to leaving only 25 per cent to be spread for pensions thus resulting in meagre monthly pensions.
She suggested that the remedy for the agitation for the payment of “at least 75 per cent lump sum’’ lies in the implementation of the provision of Section 4(4) (a) of the PRA, 2014 dealing with payment of additional benefits upon retirement.
“It provides that notwithstanding any of the provisions of this Act, an employer may agree on payment of additional benefits to the employee upon retirement,’’ she said.