Kelvin Bowoto
With companies downsizing as a result of the harsh business operating environment, 482,857 disengaged workers, primarily from the private sector, are now finding solace in their pension contributions, withdrawing N217.4 billion from pension fund assets.
As of December 2023, the pension fund’s assets had grown to N18.3 trillion.
According to the breakdown of the 3rd Quarter 2023 pension industry report released by the National Pension Commission (PenCom) at the weekend, disengaged workers accessed N43.4 billion from their pension savings between Q3 2022 and Q3 2023 to sustain their livelihood while they looked for new jobs.
However, between the implementation of the Contributory Pension Scheme (CPS) in 2004 and the third quarter of 2023, a total of N217.4 billion has been withdrawn, with the expectation that an additional N8 billion will be accessed in Q4 2023, a picture that will be clearer by the time the industry regulator releases the data, bringing the total amount withdrawn to N225 billion.
The Pension Reforms Act (PRA) of 2014 enables contributors under the age of 50 who were disengaged from work and were unable to find another job within four months of disengagement to access 25% of their individual Retirement Savings Accounts (RSAs) balance.
The hard corporate operating climate, along with high inflation and low purchasing power, FX volatility, and other factors, has driven enterprises to reduce staff strength, resulting in more workers entering an already overcrowded labor market.
With no possibility of gaining funds to support their livelihoods during these tough times, disengaged workers have turned to their pension contributions, withdrawing 25% of their pension assets.
According to industry sources, some of the beneficiaries spent their money on their business ideas in the hopes of becoming self-employed, while others utilized it to fulfill their more urgent financial requirements until they received a better employment offer.
As of the end of the third quarter of 2023, a total of 7,697 Retirement Savings Account (RSA) holders had requested access to 25% of their RSA holdings owing to a temporary loss of employment. Out of this statistic, 7,688 RSA holders’ claims were approved and awarded N8.6 billion, while 9 were denied due to their ages exceeding 50 years.
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From the 7,688 applicants whose benefits were accepted, 7,242 worked in the private sector, while the remaining 446 worked in the public sector; as of the conclusion of the quarter, the total amount withdrawn via this window had grown to N217.4 billion.
In the second quarter of last year, 8,423 disengaged workers withdrew N7,631.28 billion, and in the first quarter of 2023, 13,126 workers accessed N12,717.90 billion from the pension assets.
In the fourth quarter of 2022, however, 9,966 disengaged workers received N6.3 billion, while 11,913 RSA holders received N8.28 billion, for a total of 50,500 disengaged workers who received N43.4 billion in one year.
In response to this development, Oguche Agudah, CEO of the Pension Fund Operators Association of Nigeria (PenOp), confirmed that the number of contributors requesting the 25% permissible withdrawal has increased in recent times due to increased awareness of the provision and the harsh economy, which is causing more workers to lose their jobs.
He stated that pension fund administrators (PFAs) are pleased that contributors have such a window to make demands.
Over time, operators have profitably invested the pension assets, earning strong returns on investment, so the impact of the 25% withdrawal will not be seen, he said.
He emphasized that pension fund administrators would continue to explore additional feasible investment possibilities permitted by law in order to increase the assets and ensure that pension contributors received a fair return on their investment.
Earlier, PenCom’s director general, Mrs. Aisha Dahir-Umar, assured pension contributors that their monies were secure, noting that the commission does not generally postpone approval for the 25% withdrawal because it is legal.
She stated that this is one of the benefits of joining the new pension scheme, and she urged Nigerian workers to persuade their employers to register them with the CPS so that they can benefit from such initiatives.
Techrectory with Agency Report.
