Why Retirees are Unable to start Receiving Pension Immediately they Retire

PensionNigeria April 12, 2023May 16, 2023 Data Recapture Exercise, National Pension Commission (PenCom), Pension Fund Administrators (PFA), PensionNigeria Article, uncredited contributions

The joy of every retiree is to start receiving pension immediately they retire but what we have observed is that some retirees have to wait from 3 months to a year after retirement while some have to wait for years before they are able to start receiving their pension.

One of the main objectives of the Contributory Pension Scheme (CPS) is to ensure that every person who worked in either the Public Service of the Federation, Federal Capital Territory, States and Local Governments or the Private Sector, receives his/her retirement benefits as and when due.

In this article, PensionNigeria takes a look at the reasons why retirees are unable to start receiving pension immediately they retire.

PensionNigeria investigation has revealed that the major reasons why retirees are unable to start receiving pension immediately they retire are Unremitted pension contribution, Uncredited pension contribution, incomplete Documentation and Data Recapture Exercise, other are the normal Internal checks by the Pension Fund Administrator (PFA) and awaiting approvals from PenCom.

Unremitted pension contribution

Unremitted pension contribution can be defined as the pension contributions for an employee (employee and employer pension contributions) which the employer has not sent (remitted) to the Pension Fund Custodian (PFC) to enable the Pension Fund Administrator (PFA) credit the Retirement Savings Account (RSA) of the employee.

Section 11(3b) of Pension Reform Act 2014 states that, the employer shall not later than 7 working days from the day the employee is paid his salary, remit an amount comprising the employee’s pension contribution and the employer’s pension contribution to the Pension Fund Custodian (PFC) specified by the Pension Fund Administrator (PFA) of the employee.

PensionNigeria notes that the major reason why most retirees are unable to access the balance in their Retirement Savings Account (RSA) after retirement is because their employers, be it federal, state, local government or private sector are yet to remit all their pension contributions into their RSAs, retirees without this issue are able to access their pension much earlier.

What this simply means is that if your employer does not remit your pension contributions (employee & employer) into your RSA, the PFA will be unable to process your request to commence withdrawal from your RSA because there are no funds in your RSA. In a similar manner, if your employer has only remitted some of your pension contributions into your RSA, your PFA will still be unable to process your request to commence withdrawal from your RSA because the Revised Regulation on the Administration of Retirement and Terminal Benefits mandates that there must be “Consolidation of RSA” before a retiree can access Retirement Benefits.

Consolidation of RSA means that all the components of the RSA must be in the RSA before a retiree can access the RSA for withdrawal, the components of an RSA at retirement consist of accrued pension rights or pre-act benefits (if any) for employees that were in employment before the commencement of the CPS, employer/employee pension contributions, returns on investment and fixed portion of voluntary contributions (if any). For RSA holders working in the public sector, it is necessary to note that in addition to the Consolidation of RSA, there will also be a reconciliation of the pension contributions remitted into the RSA by the government before a retiree can access the balance in the RSA.

What can I do to ensure I don’t have Unremitted pension contribution

PensionNigeria advises RSA holders to monitor their pension contributions on monthly basis, any month you notice that your pension contribution is not credited into your RSA as at when due, you should contact your employer immediately to confirm that your pension contribution has been remitted to the Pension Fund Custodian (PFC) of the PFA. For employees that were in employment before the commencement of the Contributory Pension Scheme (CPS) whose retirement benefits consist of accrued pension rights or pre-act benefits, they are advised to ensure that they attend their bond verification exercise (where applicable) as at when due and also submit the required documents for the computation of their benefits.

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Uncredited pension contributions

Uncredited pension contributions refers to pension contributions which have been remitted by the employer to the Pension Fund Custodian (PFC) of the PFA, but for one reason or the other, the PFA is unable to credit the RSA of the employee with the pension contributions.

One would wonder why a PFA will be unable to credit the RSA of an employee after receiving the employee’s pension contributions, the truth is that there are many things that could prevent the PFA from crediting the RSA of an employee. Top on the list are, remittance by the employer without schedule, wrong RSA number and wrong name in the schedule from the employer. Where the employer remits pension contribution without a corresponding schedule that matches the amount paid or where the employer includes a wrong RSA number or name in the schedule, the PFA will be unable to use the schedule.

What can I do to ensure I don’t have Uncredited pension contribution

As an RSA holder, the best you can do to ensure you don’t have uncredited pension contributions is to make sure you provide your correct RSA details (e.g name of the PFA, your RSA number and your name) to your employer and also monitor your RSA, if you notice that your pension contribution has not been credited into your RSA as at when due, confirm from your employer immediately. You can also request your RSA statement from your PFA and audit your pension contributions from inception to date, to ensure all your pension contributions have been credited into your RSA, if you discover any uncredited pension contribution, complain to your employer immediately. PensionNigeria expects all PFAs to now have a system that identifies uncredited pension contributions immediately and escalates to the necessary department for resolution.

Incomplete Documentation

An RSA holder must ensure he keeps necessary documents pertaining to his employment, especially pay slips, and exit letter. The Revised Regulation on the Administration of Retirement and Terminal Benefits mandates that an RSA holder shall, within six (6) months to his/her mandatory/compulsory retirement, notify the PFA of his/her intention to retire from service and provide the necessary documentation as requested by the PFA.

However, it is necessary to note that documentation does not only apply to retirees, it applies to every RSA holder or beneficiary of an RSA holder that wants to withdraw from an RSA. Even though only retirees are advised to give 6 months notice, other people hoping to withdraw from an RSA, due to temporary loss of job, medical reason, death benefits etc, are advised to also visit their PFA as soon as possible to obtain the list of required documents for their type of withdrawal.

The documentation are mostly to ensure that RSA holders qualify for the withdrawal they are requesting for and also to ensure that criminals are not impersonating an RSA holder to gain access to their retirement benefits. It is necessary to note that not providing all the necessary documents will only delay your application because the PFA will not send any application that has incomplete documentation to National Pension Commission (PenCom) for approval.

Data Recapture Exercise (DRE)

DRE was initiated to obtain RSA holders’ current, complete and accurate data and it is compulsory for all RSA holders who opened their RSA before 1st of July 2019. RSA holders in the public sector, private sector and retirees must participate in the data recapture exercise to update their biodata and biometric (picture and signature) information. There are several implications for not participating in the DRE, for instance, any RSA holder who has not completed DRE will be unable to withdraw from RSA or transfer RSA from one PFA to another.

Some RSA holders have their request to withdraw from their RSA or request to transfer their RSA from one PFA to another, delayed because they had to first complete DRE before their request could be forwarded to PenCom for approval. RSA holders are advised to make out time to visit their PFA and complete their DRE, waiting to do DRE when you need to withdraw from your RSA or need to transfer your RSA from one PFA to another, will only delay your application.

Internal Checks by the Pension Fund Administrator (PFA)

The Revised Regulation on the Administration of Retirement and Terminal Benefits mandate that PFAs shall process the payment of retirement benefits within two (2) working days and forward to PenCom for approval. However, it is necessary to note that the two working days will only start counting provided you have no other issues, i.e Unremitted or Uncredited pension contribution, incomplete Documentation, Data Recapture Exercise etc. PensionNigeria expects all PFAs to have an online module or a mobile application through which RSA holders can check the status of their applications.

Awaiting approvals from PenCom

One of the top questions we have received from people on our platform is “How long will it take PenCom to approve my request for withdrawal”. The answer is, only your PFA can give you an estimate of how long it will take PenCom to approve, based on how long it has taken PenCom to approve such application in recent times. It is necessary to note that your PFA can not state categorically how long it will take because the approval will be given by PenCom, but it is wrong for the PFA to say they can not give an estimated time because this only puts the RSA holder in the dark and causes unnecessary agitation. Estimating such timeline is not rocket science and all PFAs should be able to provide it, unless they are intentionally keeping such information away from RSA holders. As per Regulation, the Revised Regulation on the Administration of Retirement and Terminal Benefits says that PenCom shall within two (2) working days of receipt of the requests for withdrawal from RSA communicate its no-objection or rejection to the PFA.

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