Boosting Retirees’ Pensions Through Pension Enhancement Initiative 

One of the most laudable initiatives introduced by the National Pension Commission (PenCom) is the periodic enhancement of pensions for retirees under the Contributory Pension Scheme (CPS).

PenCom had, in a bid to boost retirees’ monthly pensions, conducted a comprehensive analysis of the Retirement Savings Accounts (RSAs) balances of retirees under the Programmed Withdrawal (PW) mode in 2017. The outcome of the study indicated that the returns generated by the PFAs on the RSAs of the majority of the affected retirees were adequate to enhance their monthly pensions. Indeed, the study’s outcome emanated from the conservative assumptions on returns on investment adopted by PenCom in the PW template for the computation of benefits. In reality, returns on investments outweighed the assumptions, creating a reserve for retirees. Thus, the RSAs of most retirees had experienced significant growth over the years due to the high returns posted by PFAs despite the monthly pension payouts.

The Maiden Pension Enhancement, conducted in December 2017, covered employees who retired on PW mode between July 2007 and December 2014. The analysis undertaken by PenCom revealed that 64,076 retirees had sufficient growth in their RSAs to warrant an upward review of their monthly pensions. The eligible retirees benefited from an enhanced monthly pension totalling N303 million. Further to the successful maiden pension enhancement exercise, PenCom obtained the necessary approvals to conduct the enhancement every three years. 

The second edition of the Pension Enhancement was conducted in February 2020. The exercise covered employees who retired on programmed withdrawal between July 2007 and December 2017, and 86,108 retirees whose RSAs recorded sufficient growth benefited from the enhancement. The eligible retirees benefited from an aggregate enhanced monthly pension of N444 million. A remarkable development noted from the 2nd edition was that out of the 86,108 retirees eligible for the enhancement, 40,084 had benefited from the maiden exercise, while 46,024 RSAs were newly enhanced. The implication is that under the CPS, a retiree’s pension could be increased several times as long as there is sufficient growth in the RSA due to return on investment.

Significantly, PenCom has announced1 February 2023 as the commencement date for the third edition of Pension Enhancement under the CPS. The exercise will be concluded by 31 July 2023. The exercise is for existing retirees under programmed withdrawal who have accumulated significant growth in their RSAs. Based on the analysis of retirees’ data, PenCom determined that 111,187 retirees qualify for the third edition of pension enhancement. When implemented from February 2023, the 111,187 retirees’ pension would increase by N392.19 million monthly from N6.83 billion to N7.22 billion. The Commission encouraged all eligible retirees to contact their PFAs to complete all required documentation.

During the previous pension enhancements in 2017 and 2020, PFAs reported difficulty in contacting some retirees due to changes in residential address. It is therefore, important for retirees to update their PFAs with their latest contact details.

Meanwhile, implementing Pension Enhancement by PenCom is a significant indicator that the CPS provides better retirement opportunities. Pension Enhancement is a means of adjusting the periodic income of retirees against the erosion of their pension by inflation. It also solves the problem of low pensions. Pension Enhancement is another clear departure of the CPS from the Defined Benefits scheme of the past, where retirees were stuck with a fixed amount of pension for life.

It is imperative to state that PenCom assures its stakeholders of the safety of pension funds and that reasonable returns on investment are being realised for the benefit of retirees. 

Boosting Retirees’ Pensions Through Pension Enhancement Initiative 

One of the most laudable initiatives introduced by the National Pension Commission (PenCom) is the periodic enhancement of pensions for retirees under the Contributory Pension Scheme (CPS).

PenCom had, in a bid to boost retirees’ monthly pensions, conducted a comprehensive analysis of the Retirement Savings Accounts (RSAs) balances of retirees under the Programmed Withdrawal (PW) mode in 2017. The outcome of the study indicated that the returns generated by the PFAs on the RSAs of the majority of the affected retirees were adequate to enhance their monthly pensions. Indeed, the study’s outcome emanated from the conservative assumptions on returns on investment adopted by PenCom in the PW template for the computation of benefits. In reality, returns on investments outweighed the assumptions, creating a reserve for retirees. Thus, the RSAs of most retirees had experienced significant growth over the years due to the high returns posted by PFAs despite the monthly pension payouts.

The Maiden Pension Enhancement, conducted in December 2017, covered employees who retired on PW mode between July 2007 and December 2014. The analysis undertaken by PenCom revealed that 64,076 retirees had sufficient growth in their RSAs to warrant an upward review of their monthly pensions. The eligible retirees benefited from an enhanced monthly pension totalling N303 million. Further to the successful maiden pension enhancement exercise, PenCom obtained the necessary approvals to conduct the enhancement every three years. 

The second edition of the Pension Enhancement was conducted in February 2020. The exercise covered employees who retired on programmed withdrawal between July 2007 and December 2017, and 86,108 retirees whose RSAs recorded sufficient growth benefited from the enhancement. The eligible retirees benefited from an aggregate enhanced monthly pension of N444 million. A remarkable development noted from the 2nd edition was that out of the 86,108 retirees eligible for the enhancement, 40,084 had benefited from the maiden exercise, while 46,024 RSAs were newly enhanced. The implication is that under the CPS, a retiree’s pension could be increased several times as long as there is sufficient growth in the RSA due to return on investment.

Significantly, PenCom has announced1 February 2023 as the commencement date for the third edition of Pension Enhancement under the CPS. The exercise will be concluded by 31 July 2023. The exercise is for existing retirees under programmed withdrawal who have accumulated significant growth in their RSAs. Based on the analysis of retirees’ data, PenCom determined that 111,187 retirees qualify for the third edition of pension enhancement. When implemented from February 2023, the 111,187 retirees’ pension would increase by N392.19 million monthly from N6.83 billion to N7.22 billion. The Commission encouraged all eligible retirees to contact their PFAs to complete all required documentation.

During the previous pension enhancements in 2017 and 2020, PFAs reported difficulty in contacting some retirees due to changes in residential address. It is therefore, important for retirees to update their PFAs with their latest contact details.

Meanwhile, implementing Pension Enhancement by PenCom is a significant indicator that the CPS provides better retirement opportunities. Pension Enhancement is a means of adjusting the periodic income of retirees against the erosion of their pension by inflation. It also solves the problem of low pensions. Pension Enhancement is another clear departure of the CPS from the Defined Benefits scheme of the past, where retirees were stuck with a fixed amount of pension for life.

It is imperative to state that PenCom assures its stakeholders of the safety of pension funds and that reasonable returns on investment are being realised for the benefit of retirees.