Low-income retirees now have a new option regarding their retirement savings. They can either take out all of their retirement savings at once or continue to receive their monthly pension payments while waiting for the approval of a new Minimum Pension Guarantee. This change was announced in a memo from the National Pension Commission (PenCom), signed by a department head named A.M. Salem.
The memo, which was made public on November 27, 2024, explains that this decision follows a recent update in the regulations that govern retirement benefits. This update is linked to the new national minimum wage, which has increased from 30,000 Naira to 70,000 Naira.
Previously, retirees were only allowed to withdraw one-third of their total retirement savings account (RSA) balance. However, the new rules state that if a retiree’s RSA balance is not enough to provide a monthly or quarterly pension that is at least one-third of the current minimum wage (which is 23,333.33 Naira), they can now withdraw their entire RSA balance in one go.
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The memo also mentions that this change is in response to the signing of the National Minimum Wage Bill by President Bola Tinubu on July 29, 2024, which officially raised the minimum wage.
Pension Fund Administrators (PFAs) have been instructed to use the new minimum wage amount of 70,000 Naira when processing retirement benefits. Retirees who find that their monthly or quarterly pension is less than 23,333.33 Naira will have the option to either take out their entire remaining balance in their RSA or continue receiving their current pension payments while waiting for the Minimum Pension Guarantee to start.
For retirees who choose to take out their entire balance, the memo outlines that they need to submit a few documents to PenCom for approval. These documents include:
- A consent form that shows the retiree was informed about the Minimum Pension Guarantee and that they chose to withdraw their entire balance.
- A signed application letter requesting the withdrawal of the remaining balance in their RSA (this must be a handwritten signature, not an electronic one).
- A payment schedule template that is attached to the memo.
The memo emphasizes that Pension Fund Administrators must comply with these new instructions immediately.
