Pension

Economic Hardship Spurs Unprecedented Rise in Pension Savings Withdrawals

Employees resort to dipping into their Retirement Savings Accounts (RSAs) amidst growing financial challenges

Published

9 months ago

August 3, 2023

In the face of mounting economic hardship, a concerning trend has emerged where employees are increasingly turning to their Retirement Savings Accounts (RSAs) to make withdrawals.

Recent findings by Investors King indicate that the first quarter of 2023 witnessed a 240.1 percent surge in withdrawals from Additional Voluntary Contributions (ADV) to N3.02 billion. This marks a significant rise from the N887.9 million recorded in the previous quarter, Q4’22.

The National Pension Commission’s (PenCom) report for Q1’23 reveals that a notable 94.6 percent increase in the number of RSA holders withdrawing from their ADV occurred when compared to the preceding quarter. This brings the total count to 1117 individuals during the period.

Additional Voluntary Contributions, also known as ADV, were designed to empower workers to add extra funds to their mandatory pension contributions or set them aside specifically for retirement savings. The concept was introduced under the Pension Reform Act (PRA) of 2014 with the primary objective of augmenting retirement benefits for individuals.

Further analysis of the Pension Fund Administrators’ (PFAs) performance in RSA registrations for Q1’23 reveals that Stanbic IBTC maintained its leading position with 28 percent market share, attracting 23,586 new registrations.

Followed by Access Pensions Limited with an 11 percent market share and 9,546 new registrations while ARM Pension Managers Limited ranked third with a 9.2 percent market share and 9,546 new registrations.

Meanwhile, on the lower end of the performance table, NPF Pensions Managers had a meager 0.001 percent of total registrations, representing only 131 new RSAs.

Nigerian University Pension Management Company came next, accounting for 0.1 percent of total registrations, with a total of 179 new RSAs. Guaranty Trust Pensions Managers Limited secured 1.1 percent of total registrations with 879 new RSAs.

Experts have expressed concern over the growing number of individuals resorting to early withdrawals from their pension savings, which could significantly impact their financial security during retirement. The prevailing economic challenges may be driving employees to dip into their hard-earned savings, but it could potentially compromise their future financial stability.

Financial advisors urge employees to explore other viable alternatives for managing financial difficulties, such as seeking financial counseling, exploring government assistance programs, or utilizing emergency savings funds. Protecting one’s retirement savings remains crucial for ensuring a comfortable and secure post-employment life.

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Samed Olukoya

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Pension

Nigeria’s Pension Fund Value Plummets by 29% to $14.39bn Amid Naira Depreciation

Published

1 month ago

March 19, 2024

Samed Olukoya

Nigeria’s pension fund value has declined by 29% to $14.39 billion in January 2024.

This drop attributed primarily to the ongoing depreciation of the naira against the dollar represents a contrast from the $20.41 billion recorded in December 2023.

The latest unaudited report on the pension funds industry portfolio revealed that the conversion rate of the naira to the dollar played a pivotal role in this decline.

In January, the naira was converted at a rate of N1,356.88/$, a significant deviation from the N899.39/$ rate observed in December.

This depreciation trend in the naira has been persistent since June 2023, following adjustments made by the Central Bank of Nigeria.

The continued weakening of the national currency in 2024 further exacerbated the erosion of the pension fund’s value when measured in dollar terms.

While the dollar value of the pension fund experienced a substantial downturn, in naira terms, the total assets under the Contributory Pension Scheme witnessed an increase to N19.53 trillion from N18.36 trillion at the end of 2023.

A significant portion of these assets, estimated at N12.14 trillion, was invested in Federal Government securities, reflecting a strategy to navigate the challenging economic landscape.

Amidst concerns over the impact of naira depreciation on pension funds, stakeholders have emphasized the need for prudent financial management and diversification of investment portfolios to mitigate risks associated with currency fluctuations.

Pension

Pension Fund Administrators Channel N130 Billion into Infrastructure Investments

Published

5 months ago

November 27, 2023

Investors King

Pension Fund Administrators (PFAs) have strategically invested N130.18 billion from the Contributory Pension Scheme into infrastructure projects by the end of September 2023.

The data from the National Pension Commission reveals the commitment of PFAs to diversifying their investment portfolio while maintaining compliance with the Pension Reform Act of 2014.

As of the reporting period, the total assets under the Contributory Pension Scheme amounted to N17.35 trillion.

In addition to infrastructure investments, PFAs directed funds into various avenues, including domestic and foreign ordinary shares, federal and state governments’ securities, and money market instruments.

The investment strategy aligns with the amended investment regulation introduced by the commission.

The regulation outlines stringent requirements to ensure prudent and compliant investment practices in line with the provisions of the Pension Reform Act.

It emphasizes that pension fund custodians should adhere to written instructions from licensed PFAs regarding the investment and management of pension fund assets.

The regulation also sets guidelines for allowable investments outside Nigeria, and PFAs are cautioned against contracting out the custody of pension fund assets to third parties without prior approval.

This strategic approach not only upholds regulatory standards but also serves the long-term interests of contributors, ensuring a balanced and diversified investment portfolio.

Pension

Federal Government Completes N1.02 Billion Payment to Power and Transport Pensioners

Published

6 months ago

November 6, 2023

Investors King

The Federal Government announced the successful disbursement of N1.02 billion to 7,091 pensioners from the Power and Transport Sectors of the Parastatals Pension Department.

This vital step to fulfill pension obligations was revealed by Olugbenga Ajayi, the Head of the Corporate Communications Unit at the Pension Transitional Arrangement Directorate (PTAD), in a statement released on Sunday.

The allocated sum accounts for 39% of the accrued pension arrears owed to retirees in these sectors for the period spanning from August 2015 to September 2023.

The process involved a meticulous calculation of each pensioner’s monthly pension based on their career details, salary structure, and applicable pension increments.

This commendable initiative stemmed from the realization that 7,091 pensioners in the power and transport sector were receiving inadequate pension payments due to discrepancies within the inherited payroll system managed by PTAD.

Dr. Chioma Ejikeme, the Executive Secretary of PTAD, reiterated the government’s commitment to upholding fairness, equity, and justice, ensuring that every pensioner receives their rightful pension under the Defined Benefit Scheme.

Dr. Ejikeme also assured federal pensioners that the payment of accrued pension arrears would continue until all obligations are satisfied, subject to the availability of government funding.

This announcement underscores the government’s unwavering dedication to the welfare of retirees and is a significant milestone in addressing outstanding pension liabilities in the country.