Regulators move to implement new pension guidelines

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Regulators of the Contributory Pension Scheme in Lagos State and
federal level are working together to implement new guidelines that
have been introduced since the amended of the Pension Reform Act in
2014, investigation has revealed.

After the amendment of the Pension Reform Act in 2014, the
National Pension Commission introduced some draft and new
guidelines to enforce sections in the country’ statutory pension
laws.

The Lagos State Government, in an early lead in adopting the CPS
compared to other states of the federation, is also amending its
pension laws to align with the provisions of the PRA 2014.

Some of the drafts and guidelines released by PenCom in recent
years are the multi-fund structure, pension enhancement for
retirees on programmed withdrawal, harmonisation of pension
entitlements, access to the RSA (the mortgage option), and minimum
pension guarantee.

The Director-General, Lagos State Pension Commission, Mrs.
Folashade Onanuga, said it was cogent to update officials of
government in charge of pension matters on innovations in the PRA
2014.

During a seminar on update on the CPS in Lagos, she said the
contributory pensions that Lagos State subscribed to was not an
isolated scheme, but a programme that was introduced by the Federal
Government, with PenCom as the regulator.

According to her, PenCom is the national regulator of the CPS
while LASPEC is the Lagos state’s regulator.

Onanuga said, “We also need to have a feel of the innovations
coming from PenCom to exchange ideas as state regulators. We
understand that everything Lagos State tries to do is to benefit
the workers and we need to do this within the confines of the
CPS.”

The director-general said the state was also sensitising the
parastatals and agents of government to the need to comply with the
Group Life Insurance Policy.

Fund structure

While speaking on one of the guidelines, an official of PenCom,
Mr. Babatunde Philips, said that in 2017, PenCom released the
amended regulation on investment of pension fund assets.

He said the new investment guidelines introduced a multi-fund
structure, which replaced the former structure that put all active
contributors into one Retirement Savings Account fund without
consideration for age or risk profiles of such contributors.

Under the new structure, he explained that all the PFAs would be
offered the multi-fund structure for the RSA comprising four funds
and differed based on overall exposure to variable income
instruments, and that the different funds would be made to fit the
ages and risk profiles of contributors.

“The fund types include Fund I, which is for young contributors
based on choice; Fund II for young and middle-aged contributors
(ages 49 years and below); Fund III: for pre-retirees (ages 50
years and above) and Fund IV for retirees,” he said.

Pension enhancement

After much clamouring for enhancement of pensions under the CPS,
Philips said that PenCom addressed this following the appreciable
growth in the RSAs of retirees.

He said the commission developed a framework to set out the
modalities for enhancement of the pensions of retirees on the PW
under the CPS based on surpluses generated from return on
investment on retirees’ funds.

Harmonisation of pension entitlements

Section 173 (1) of the 1999 Constitution (as amended) provides
that “the right of a pension in the public service of the
federation to receive pension or gratuity shall be regulated by
law” – the law in the case of the CPS is the PRA 2014.

Section 173 (3) of 1999 Constitution (as amended) provides that
“pensions shall be reviewed every five years or together with any
federal civil servants’ salary reviews, whichever is earlier” for
the Defined Benefit (old) Pension scheme.

According to PenCom, the pension enhancement framework in line
with one of the objectives of the PRA 2014 seeks to harmonise the
pension rights of retirees in both the private sector as well as in
the public sector of the federal, state and local governments in
Nigeria.

Residential mortgage option

Section 89 (2) 0f the PRA 2014 provides that a PFA may, subject
to guidelines issued by PenCom, apply a percentage of pension fund
assets in the RSA towards payment of equity contribution for
payment of residential mortgage by a holder of the RSA.

The main objective of section 89 (2) is to facilitate access by
the RSA holders to residential mortgages as well as stimulate the
housing/mortgage finance sector.

According to PenCom, the proposed establishment of a mortgage
guarantee company by the Federal Government through the Central
Bank of Nigeria will enable an RSA holder to obtain a mortgage loan
based on a mortgage guarantee issued by the MGC and secured by a
portion of the workers’ RSA balance.

Minimum pension

Section 84 (1) of the PRA 2014 provides that all RSA holders who
have contributed to a licenced PFA for a number of years to be
specified by the commission shall be entitled to a guaranteed
minimum pension as may be specified from time to time by the
commission.

PenCom stated that the GMP is the lowest benchmark of pension
which an eligible retiree under the CPS receives as minimum
pension.

“It is an absolute amount which is equivalent to a certain
percentage (to be determined by the commission from time to time)
of the national minimum wage,” it stated.

According to the commission, the MPG will cover the RSA holders
who contribute and retire under the CPS.

It stated that retirees solely on the PW whose RSA balances
could only provide a stream of incomes lower than the GMP at the
point of retirement and whose RSA balances at the point of
retirement could provide a stream of incomes equal or higher than
the GMP would benefit from it.

Regulators of the Contributory Pension Scheme in Lagos State and
federal level are working together to implement new guidelines that
have been introduced since the amended of the Pension Reform Act in
2014, investigation has revealed.

After the amendment of the Pension Reform Act in 2014, the
National Pension Commission introduced some draft and new
guidelines to enforce sections in the country’ statutory pension
laws.

The Lagos State Government, in an early lead in adopting the CPS
compared to other states of the federation, is also amending its
pension laws to align with the provisions of the PRA 2014.

Some of the drafts and guidelines released by PenCom in recent
years are the multi-fund structure, pension enhancement for
retirees on programmed withdrawal, harmonisation of pension
entitlements, access to the RSA (the mortgage option), and minimum
pension guarantee.

The Director-General, Lagos State Pension Commission, Mrs.
Folashade Onanuga, said it was cogent to update officials of
government in charge of pension matters on innovations in the PRA
2014.

During a seminar on update on the CPS in Lagos, she said the
contributory pensions that Lagos State subscribed to was not an
isolated scheme, but a programme that was introduced by the Federal
Government, with PenCom as the regulator.

According to her, PenCom is the national regulator of the CPS
while LASPEC is the Lagos state’s regulator.

Onanuga said, “We also need to have a feel of the innovations
coming from PenCom to exchange ideas as state regulators. We
understand that everything Lagos State tries to do is to benefit
the workers and we need to do this within the confines of the
CPS.”

The director-general said the state was also sensitising the
parastatals and agents of government to the need to comply with the
Group Life Insurance Policy.

Fund structure

While speaking on one of the guidelines, an official of PenCom,
Mr. Babatunde Philips, said that in 2017, PenCom released the
amended regulation on investment of pension fund assets.

He said the new investment guidelines introduced a multi-fund
structure, which replaced the former structure that put all active
contributors into one Retirement Savings Account fund without
consideration for age or risk profiles of such contributors.

Under the new structure, he explained that all the PFAs would be
offered the multi-fund structure for the RSA comprising four funds
and differed based on overall exposure to variable income
instruments, and that the different funds would be made to fit the
ages and risk profiles of contributors.

“The fund types include Fund I, which is for young contributors
based on choice; Fund II for young and middle-aged contributors
(ages 49 years and below); Fund III: for pre-retirees (ages 50
years and above) and Fund IV for retirees,” he said.

Pension enhancement

After much clamouring for enhancement of pensions under the CPS,
Philips said that PenCom addressed this following the appreciable
growth in the RSAs of retirees.

He said the commission developed a framework to set out the
modalities for enhancement of the pensions of retirees on the PW
under the CPS based on surpluses generated from return on
investment on retirees’ funds.

Harmonisation of pension entitlements

Section 173 (1) of the 1999 Constitution (as amended) provides
that “the right of a pension in the public service of the
federation to receive pension or gratuity shall be regulated by
law” – the law in the case of the CPS is the PRA 2014.

Section 173 (3) of 1999 Constitution (as amended) provides that
“pensions shall be reviewed every five years or together with any
federal civil servants’ salary reviews, whichever is earlier” for
the Defined Benefit (old) Pension scheme.

According to PenCom, the pension enhancement framework in line
with one of the objectives of the PRA 2014 seeks to harmonise the
pension rights of retirees in both the private sector as well as in
the public sector of the federal, state and local governments in
Nigeria.

Residential mortgage option

Section 89 (2) 0f the PRA 2014 provides that a PFA may, subject
to guidelines issued by PenCom, apply a percentage of pension fund
assets in the RSA towards payment of equity contribution for
payment of residential mortgage by a holder of the RSA.

The main objective of section 89 (2) is to facilitate access by
the RSA holders to residential mortgages as well as stimulate the
housing/mortgage finance sector.

According to PenCom, the proposed establishment of a mortgage
guarantee company by the Federal Government through the Central
Bank of Nigeria will enable an RSA holder to obtain a mortgage loan
based on a mortgage guarantee issued by the MGC and secured by a
portion of the workers’ RSA balance.

Minimum pension

Section 84 (1) of the PRA 2014 provides that all RSA holders who
have contributed to a licenced PFA for a number of years to be
specified by the commission shall be entitled to a guaranteed
minimum pension as may be specified from time to time by the
commission.

PenCom stated that the GMP is the lowest benchmark of pension
which an eligible retiree under the CPS receives as minimum
pension.

“It is an absolute amount which is equivalent to a certain
percentage (to be determined by the commission from time to time)
of the national minimum wage,” it stated.

According to the commission, the MPG will cover the RSA holders
who contribute and retire under the CPS.

It stated that retirees solely on the PW whose RSA balances
could only provide a stream of incomes lower than the GMP at the
point of retirement and whose RSA balances at the point of
retirement could provide a stream of incomes equal or higher than
the GMP would benefit from it.

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