Pension lump sum is not 25% of RSA balance

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Chuks Udo Okonta

The public belief that Contributory Pension Scheme (CPS) lump sum paid to retirees is 25 per cent of their Retirement Savings Account (RSA) balance is not true.

CPS lump sum is not determined by percentage, but achieved through a unique device called pension calculator.

To determine lump sum payment, four important factors about retirees are required and they are:

* Retirement Savings Account (RSA) balance

* Last salary of the retiree

* Gender

* Retirement age.

National Pension Commission (PenCom) its is Revised Regulation on the Administration of Retirement and Terminal Benefits stated the PROCEDURE FOR PROCESSING BENEFITS as thus:

4.1Programmed Withdrawal/Retiree Life Annuity

(a)A PFA shall at the point of processing a retirement benefit, ensure that all components of the RSA are consolidated.

(b)The amount in the retiree’s RSA shall be moved to Retiree Fund.

(c)The PFA shall compute the monthly or quarterly pension/annuity and
lump sum from the retiree’s RSA balance using the Standard Retirement
Benefits Computation (SRBC) Template issued by the Commission, which
will guide the RSA holder on the choice of his/her preferred mode of

(d)Where the RSA balance is sufficient for PW/Annuity option, the monthly or
quarterly pension/annuity shall be at least 50 per cent of the final salary based on the ATE as at the date of his retirement.

(e)Where a retiree desires to withdraw a lump sum, the PFA shall first determine
the amount required to provide pension or annuity for life. The residual
amount in the RSA may be paid as lump sum in accordance with the retiree’s

(f)Without prejudice to 4.1(d)above, where the RSA balance cannot provide
50 per cent of the retiree’sATE as monthly/quarterly pension, such retiree shall be entitled to a concessionary Regulatory Lump sum of 25% of the RSA

(g)Notwithstanding 4.1(d)(e)and (f) above, where the RSA balance cannot
provide a monthly/quarterly pension or annuity of at least one third of the
prevailing minimum wage, the retiree shall be allowed to take the entire
balance in the RSA en-bloc.

(h)PFAs shall use the SRBC Template to compute the benefits of retirees and
arrears of monthly/quarterly pension (if any).

(i)Further to (h) above, PFAs shall use the RSA Balance as at date of
consolidation for determining the retirement benefits of a retiree.

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