Withdrawals from pension funds up 71% as more Nigerians lose jobs - Businessday

December 13, 2016
Pension funds have come under pressure from increased withdrawals, as the country's biting recession is causing many Nigerians to lose their jobs.

Figures obtained from the National Pension Commission (PenCom) third quarter report for the period ended September 2016 show that a total of 177,284 people aged less than 50 years have so far accessed about 25 percent of their Retirement Savings Account (RSA) balance in the sum of N55.46billion, having been disengaged from work in the last four months or more.

The 2016 figures represent a significant 41 percent increase in the number of people taking money from their pension funds, compared to the 125,295 cumulative withdrawals recorded in the same period of 2015. The amount withdrawn also rose 71% from N33 billion in the same period of 2015, showing that more Nigerians are turning to their accumulated pension funds as they lose their incomes.

The figures also show that the private sector accounted for 90 percent of disengaged workers.

A total of 4.5 million Nigerians have lost their jobs between the third quarter of 2015 and the second quarter of 2016 according to figures from the Nigerian Bureau of Statistics (NBS). The huge job losses is what is forcing those affected to access part of their RSA balance, a safety net for such misfortunes.

Section 7 (2) of the Pension Reform Act 2014 says that "where an employee voluntarily retires, disengages or is disengaged from employment, as provided for under subsections (2) and (5) of section 16 of this Bill, the employee may, with approval of the Commission, withdraw an amount of money not exceeding 25 percent of the total amount credited to his or her retirement savings account, provided that such withdrawal shall only be made after four months of such retirement or cessation of employment and the employee does not secure another employment."

Olulana Loyinmi, head, Benefits and Insurance Department in PenCom, who confirmed the rush of applications for withdrawal of part of their RSA fund by disengaged workers, attributed it to the rising loss of jobs due to the current economic recession.

Loyinmi said paying these reliefs is a provision of the law, which is part of the objectives of the establishment of the contribution pension scheme.

"What you find here is an indication of how people are losing their jobs, or are getting disengaged and having waited for about four months without getting another job, they resort to accessing their retirement accounts. If you measure the documents we process, it is about half of the activities of the commission since January", he said.

Susan Oranye, executive secretary, Pension Fund Operators Association of Nigeria (PenOp) reacting to the development, said what has happened at the moment, where pension funds have assisted people who lost their jobs to meet basic needs, pending when they secure new jobs, has further emphasised the benefits of the pension scheme.

"The impact is there on accumulated pension funds, no doubt, but then, that is what it is meant for because the law envisaged that contributors could at any time lose their jobs. So before they secure a new job, they would need something to fall back on, to meet basic needs and support their families".

Oranye observed that part of the objectives of the contribution pension scheme have been met in this instance, "because it is not only when one retires that you enjoy the benefit, it could come before retirement." She however observed that the current economic recession is a passing phase and will not last forever. She said when the recession blows over and people get employment again, the fund would be built up again.

Oranye also observed that the planned expansion of the pension scheme into the informal sector, by introduction of the micro pension scheme, would further reduce the impact of the current rush of withdrawals from the fund, as many people outside the existing scheme would be brought in to replenish the fund.

Modestus Anaesoronye

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Steven Rich
Sep 17, 2018:
Well done
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