PenCom’s guide to a worthwhile retirement
By Patience Ikpeme
As the Nigerian workforce continues to grow and evolve, it is increasingly important for workers to adequately prepare for retirement.
Workers enrolled in the Contributory Pension Scheme (CPS) can ensure a secure retirement by making informed financial decisions early on.
The National Pension Commission (PenCom) is responsible for equipping workers with essential knowledge on navigating CPS to ensure a prosperous and worry-free retirement.
The Director-General, PenCom, Mrs. Aisha Dahir-Umar in a statement said the CPS encourages active participation from both employers and employees, ensuring a substantial retirement fund for workers.
She stated that in an era where economic uncertainties loom large, Nigerian workers must be proactive in their preparation for retirement.
She said: “Under the CPS, workers can take control of their financial destinies and embrace retirement confidently. The CPS offers a practical framework for workers in Nigeria to build adequate savings for their retirement.
“Although enrolling in the CPS is a significant leap towards happy retirement, workers must adopt a proactive approach to secure a comfortable and financially stable future.”
PenCom states that the CPS, established by the Pension Reform Act 2004 (PRA 2004) and later repealed and replaced with PRA 2014, was designed to provide a sustainable and efficient retirement savings structure for Nigeria’s public and private sector workers.
The CPS encourages active participation from both employers and employees, ensuring a substantial retirement fund for workers.
In an era where economic uncertainties loom large, Nigerian workers must be proactive in their preparation for retirement. To achieve a comfortable and financially stable future, workers must adopt a proactive approach and start early. Even modest monthly contributions can accumulate over the years, providing a sizeable nest egg for retirement.
Workers should envision their retirement needs and set clear goals regarding pension savings. Understanding how they wish to spend their golden years will help shape savings targets, investment strategies, and additional contributions to shore up their retirement savings towards a high pension in their golden years.
It is also important for workers to understand the details of their pension plan by familiarising themselves with the minimum contribution rate, Multi-Fund Structure used by Pension Fund Administrators (PFAs) for pension assets allocation, etc. They may also seek assistance from their employer’s human resources department or Pension Fund Administrators (PFAs) to clarify any uncertainties and make informed decisions about their retirement savings.
As PenCom periodically reviews and updates pension regulations, workers must stay informed about any changes that may impact their retirement savings. It is necessary to keep abreast of pension-related news and consult financial experts to ensure compliance with the latest developments.
While certain situations may arise, workers are advised against early withdrawals from their pension accounts. Early withdrawals can severely diminish the potential growth of retirement savings and jeopardise future financial security. To maximise the power of compounding, workers should avoid dipping into their pension funds before retirement, except under critical circumstances such as permanent incapacitation.
Consulting with a qualified financial advisor can provide personalised guidance, ensuring that workers make informed decisions aligned with their goals in terms of pension at retirement: Programmed Withdrawal or Annuity, Exploring additional savings options such as savings accounts, real estate investments, and mutual funds can provide further financial security.
Preparing for retirement under the CPS requires proactivity, financial literacy, and discipline. Embracing these principles will benefit individuals and contribute to a stronger and more financially resilient Nigerian society. Taking charge of our financial future will lead to a rewarding retirement.
