A Lump sum is a bulk payment to a retiree from the balance in the retiree’s Retirement Savings Account (RSA).
No matter how much lump sum a retiree receives most retirees will definitely love to receive additional lump sum, but getting additional lump sum goes beyond need or wish, there are specific things that must happen before a retiree can receive additional lump sum.
The recently Revised Regulation on the Administration of Retirement and Terminal Benefits clarified that retirees shall be allowed to access additional lump sum after the payment of initial lump sum provided that there are additional inflows of funds into the RSA from the employer.
However, it is necessary to note that getting additional inflow in your RSA from your employer is not a guaranty that you will get additional lump sum because the additional inflow shall first be applied to augment the retiree’s pension up to 50% of the retiree’s final salary while the balance may be paid out as lump sum.
To break this down, if a retiree’s last monthly salary is N200,000 per month and the retiree’s monthly pension is N70,000 per month, the additional inflow will first be used to ensure the retiree can be paid a minimum of half the last salary, which is N100,000 for the remaining estimated lifespan, and the balance if any, shall then be paid out as lump sum.
An additional lump sum is guaranteed where the retiree receives additional inflow from the employer and the retiree’s monthly pension is already up to 50% of the retiree’s final salary, the retiree may choose to collect the entire additional remittances as lump sum or use the additional remittance to further augment the monthly pension.
Everything discussed above is for a retiree on lumpsum and programmed withdrawal with Pension Fund Administrators (PFAs), where there is additional inflow into the RSA of a retiree on Retiree Life Annuity (RLA) and the amount is not up to N100,000, the amount shall be paid directly into the retiree’s bank account, subject to PenCom’s approval. Where the amount is N100,000 and above, the PFA shall advise the retiree to obtain a Retiree Life Annuity Provisional Agreement from the insurance company to transfer the amount to the retiree’s existing RLA Provider as premium for the purchase of additional annuity.
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