PenCom Cushions Unemployment as 40,646 RSA Holders Accessed N26.9bn in 2022

The National Pension Commission (PenCom) approved the payment of N26.9 billion to 40,646 Retirement Savings Account (RSA) holders who were disengaged from work in 2022. 

The Pension Reform Act 2014 (PRA 2014) allows pension contributors to access 25 percent of the balance of their RSA in the event of a temporary job loss. Temporary job loss, as established by the PRA 2014, is when an employee who loses a job cannot secure another employment after four months. Pension Fund Administrators (PFAs) made the N26.9 billion payments to RSA holders who lost their jobs, and were under 50 years old and did not secure jobs within four months of their disengagement.

Section 7 (2) of the PRA 2014 states that “where an employee voluntarily retires, disengages or is disengaged from employment as provided for under section 16 (2) and (5) of the PRA 2014, the employee may, with the approval of the Commission, withdraw an amount of money not exceeding 25% of the total amount credited to his RSA, provided that such withdrawals shall only be made after 4 months of such retirement or cessation of employment and the employee does not secure another employment.”

The above provision of the PRA 2014 is one of the novel changes made by the Contributory Pension Scheme. Unlike the old Defined Benefits Scheme (DBS), which left many employees who lost their jobs without retirement benefits. Section 7(2) of the PRA 2014 guaranteed financial security to employees under the CPS as they have their RSA balances to fall back on in case of temporary job loss. It is pertinent to note that RSAs are individualised; therefore, account holders can change employers without the fear of losing their retirement benefits.  

From the inception of the CPS to the end of 2022, PenCom has approved N188.51 billion in respect of 453,686 requests from individuals seeking to access 25 percent of their RSA balances due to temporary loss of employment. 

The payment approvals were granted to PFAs after the Commission authenticated that the RSA holders who lost jobs were under the age of 50 years and were unable to secure another employment four months after the date of their disengagements. 

A breakdown of the payment approvals in 2022 showed that during the first quarter, the Commission approved PFAs’ requests to pay N5.66 billion to 9,966 RSA holders that were disengaged from employment. In the second quarter of the same year, PFAs paid N6.65 billion to 9,250 RSA holders in respect of job loss. In the third quarter, N8.28 billion was disbursed to 11,913 RSA holders, while during the fourth quarter, the Commission approved PFAs to pay N6.31 billion to 9,966 RSA holders.

Furthermore, the PRA 2014 provides that where an employee has accessed the 25 percent for temporary loss of job, such employee shall subsequently access the balances in the retirement savings account only at the time of retirement.

Notwithstanding the provision of section 7(2) of the PRA 2014, it is pertinent for RSA holders to understand that the CPS is designed to cater for life at retirement. Therefore, the RSA is unlike the regular savings account with a commercial bank, where a customer deposits and withdraws funds at any time. Consequently, all withdrawals from an employee’s RSA are based on conditions allowed under the PRA 2014, including the 25% access for temporary job loss.

In conclusion, it is noteworthy that an employee who had accessed 25 percent of his RSA balance due to job loss is expected to resume pension contribution once he secures another employment by providing his new employer with his RSA details.