Economic Hardship Spurs Unprecedented Rise in Pension Savings Withdrawals

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.