Pensioners should support pension managers and allow them to manage the remaining 75 per cent of their Retirement Savings Accounts when they retire in order to guarantee them regular monthly payments.
The Managing Director/Chief Executive Officer, IEI Anchor Pensions Managers, Glory Etaduovie, said this in an article, titled ‘Who needs 75 per cent pension lump sum upfront payment?’
He said, “A critical aspect of the desire of Nigerian retirees to withdraw huge part of the individual pension money upfront is based on ignorance of assumed enough financial literacy to better self-manage the funds. There are permutations and agitations being circulated on how people would have done better managing their own funds.
“This is misleading and a great disservice to the retirees. The investment environment is dynamic, highly unpredictable, except for the skills acquired over time in funds management. Also, the benefit of the group and institutional investments is inestimable.”
Etaduovie said recently money market, Treasury bills and equities surprised a lot of people on how low rates and pricing could be.
He said yet fund managers stabilised their funds, hedging with a more stable class of investment for higher averages.
He said, “Many have dreamt of starting a business at retirement that they knew little about. What is the failure ratio of many start-ups? Research shows that 90 per cent fail.
“Based on the research, 21.5 per cent failure in the first year, 30 per cent in the second year and 50 per cent in the fifth year. The business idea might even be of a crazy one from a relation who knows of your retirement money coming and has planned with it in mind. Then the money evaporates, as well as the ‘crazy’ relation.”
“The truth is that pension money is not adventure money. People should be winding down then,” he said, adding that retirees should be very careful with their pension money.
Citing the Pension Reform Act 2014, Etaduovie noted that the Nigerian system requires that an employer and employee contribute agreed minimum percentages into a managed fund actuarially predetermined by the Act guiding pension management, for investment, security, and growth over a period.
“The longer the years of participation, the higher the accumulation, the better for investment returns and benefits size,” he said.
He observed that some present complaints on the size of the individual pension fund at retirement were because of the relatively short period the Contributory Pension Scheme had been in operation.
According to him, the government is very interested in how to spend the pension money for sustainability and coverage over the remaining years of the retiree.
“This to avoid becoming a social burden on it or the younger workforce,” Etaduovie added.
