By Adeyemi Sulaimon
The need for proper retirement planning was the focus of a one-day enlightenment forum organised for Muslim professionals in Alimosho area of Lagos state.
The seminar, with the theme ‘Retire Well,’ was held on Sunday at the Alimosho Local Government Secretariat Hall in Akowonjo.
The Guest Speaker, Mr Kazeem Lawal, of the Stanbic IBTC Pensions, took participants through the current pension dispensation in Nigeria and how they can be deliberate about their retirement plannings while in active service.
“We are discussing this topic now because we are not getting younger and we need to enlighten ourselves on the current pension scheme in Nigeria,” he said.
He explained retirement as the withdrawal from one’s position or from one’s active working life, which can be voluntary or mandatory.
Pension, according to him, is a fixed amount of money paid regularly to somebody during retirement by the government, former employer or Pension Fund Administrator.
Pre-act in Public Sector
Tracing the history of pensions schemes in Nigeria, Lawal explained that prior to the enactment of the Pension Reform Act 2004, the public service operated an unfunded Defined Benefits Scheme (DBS) and the payment of retirement benefits were budgeted annually.
Lawal said the annual budgetary allocation for pension was often one of the most vulnerable items in budget implementation.
In many cases, even where budgetary provisions were made, inadequate and untimely release of funds resulted in delays and accumulation of arrears of payment of pension rights.
It was obvious that the DBS does not make economic sense and could not be sustained.
Pre-act in Private Sector
“In the private sector, many employees were not covered by the pension schemes put in place by their employers and many of these schemes were not funded.
“Besides, where the schemes were funded, the management of the pension funds was full of malpractices between the fund managers and the Trustees of the pension funds.
“Again, the challenges with DBS showed that it was not sustainable and the government had to come up a solution!”
Pension industry today
The current Contributory Pension scheme was officially launched in June 2004 to replace the Defined Benefit scheme.
Lawal revealed that the Asset Under Management, AUM, in the Nigerian Pension Industry has grown to about N8 trillion, with about 8 million active Retirement Savings Account, RSA, contributors.
This, according to him, is close to 8.3% of the total workforce in Nigeria.
Nigeria currently has 21 Pension Fund Administrators, PFAs, 6 Closed Pension Fund Administrators, CPFA, and 4 Pension Fund Custodians.
Stanbic IBTC Pensions is the biggest PFA in terms of client-base and AUM.
He emphasized that what people get from their pensions savings after retirement is not always enough to cater for their needs, hence the need to establish alternative source of income ahead of retirement.
Lawal also encouraged the participants to pay attention to pension-related information in the news.
Seven ways to retire well
He listed seven ways that the participants can adopt to retire well.
“Visualize your future – Plan your retirement while in active service.
“Be financially intelligent – Carry out capital projects to reduce your running costs during retirement.
“Be prudent – Live below your means and avoid debt as much as possible.
“Stay healthy – Maintain a good lifestyle to reduce health-related issues after retirement as this can erode all your life savings.
“Maintain good relationship with family and friends – You will need them when you retire from the regular 8 to 5.
“Maximize your RSA – Register with Stanbic IBTC Pension Managers and ensure your employer contributes to your RSA. Fix duplicate RSA PIN and documentation issues before retirement.
“Constantly make effort to establish profitable alternative sources of income.”