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Chuks Udo Okonta
Many workers at the point of retirement get trapped in dilemma of choosing either annuity or programmed withdrawal as best monthly benefits payments. But recent events in the country have shown that both have limitations.
Owing to the emerging limitations occasioned especially by government policies, it has become necessary for retirees to diversify and plan towards earning from both benefits payments.
Programmed withdrawal is a monthly retirement benefit payment managed by Pension Fund Administrators (PFAs), while annuity is benefit payment managed by life insurance companies.
How to earn from both payment platforms.
To earn from both payment platforms, you need to set a plan, which would entail subscribing to Contributory Pension Scheme (CPS) domiciled in pension sector and deferred annuity which is in the insurance sector.
At the point of retirement, retirees are entitled to lump sum payment, if their Retirement Savings Account (RSA) balances could provide a monthly pension of at least one third of the prevailing minimum wage (N30,000.00) and either programmed withdrawal or annuity.
The Pension Reform Act (PRA) 2014, provides that a retiree has to choose either programmed withdrawal or annuity. This is why many retirees often throw dice to choose the option that would meet their retirement needs.
Since retirees are left with just one plan, if you desire to earn retirement monthly benefits from both plans, you have to structure your personal plan aside the CPS, which is subscribing to deferred annuity offered by life insurance companies, while you are in active service – while you work.
Subscribing to deferred annuity while you work, would enable you build robust funds which you could use to buy annuity at retirement, while the retirement savings account balance with the PFA should be channeled into programmed withdrawal.
Also, if you desire to earn from both payment platforms and had no knowledge on deferred annuity before now, you should channel your lump sum payment to buy annuity and used the outstanding balance for programmed withdrawal.
The need to diversify retirement benefit payments, has become necessary as most retirees in the Defined Contribution Scheme (DCS)/ Contributory Pension Scheme (CPS) are expressing worries on how inflation and recent government policies have made life unbearable for them.
You that is still working, it is time to structure how you want to live in retirement. Embrace deferred annuity today to support your CPS contributions.
For you that is about to retire or that had retired, but has not received lump sum payment, pls when it comes, channel it to deferred annuity and use the balance for programmed withdrawal.
Earning from both payment platforms remains one of the best means to have a comfortable lifestyle in retirement.