The National Pension Commission on Monday issued a revised regulation on retirement and terminal benefits for immediate implementation.
The regulation simplifies some difficulties and guides the process of accessing retirement and terminal benefits by pension contributors and retirees under the Contributory Pension Scheme.
This is the first comprehensive review of the regulation since its initial issuance in 2007.
The commission said the review has input from “key stakeholders” in order to ensure a more efficient retirement benefits administration.
According to a release by the commission Monday, the revised regulation contains several new provisions on pension enhancement, voluntary contributions, temporary access to RSA due to loss of job, payment under the Micro Pension Plan, administrative sanctions for violations by Pension Fund Administrators (PFAs), amongst others. The regulation also introduces salient amendments to several existing provisions while providing more clarity on others.
The key highlights of the revised regulation include the simplification of the documentation process, non-confirmation of employment status by employers, access to lump sum, RSA consolidation before payment of benefit.
While the old regulation outlined the documents required for retirees to access benefits, the revised regulation as a way of simplifying the process has now mandated PFAs to make efforts to ensure that all documentation preparatory to the retirement of the Retirement Savings Account (RSA) holder should be provided and concluded within a period of four months prior to the date of retirement.
“In order to ensure that prospective retirees are duly educated on the modes of accessing their benefits, PFAs have also been mandated to advise prospective retirees to check their websites and be acquainted with the CPS Retirement Pack containing features of Programmed Withdrawal (PW) and Retiree Life Annuity (RLA) at least three months to date of retirement. The pack also contains other salient issues that would guide the retirees towards a smooth retirement process”.
Non-confirmation of employment status by employers
Also, the revised regulation has simplified the provisions on the notification and documentation required for access to RSA due to temporary loss of job.
Temporary loss of job has been defined as a situation “where an employee voluntarily retires, disengages or is disengaged before attaining the age of 50 years and is unable to secure another employment after four months of the disengagement.”
“The provision addresses situations where employers refuse to confirm the retirement or disengagement of their former employees. Prior to this revision, a letter of acceptance of resignation or disengagement issued by the employer is mandatory for a pension contributor seeking payment of 25 percent for temporary loss of job. However, the Revised Regulation provides that where the employer fails/refuses to accept the
resignation letter from the employee, the PFA shall write the employer confirming the employee’s resignation and ensure that an acknowledgement copy is kept as proof of receipt.
Where the employer fails to respond to the PFA’s inquiry within 30 days, the employer’s refusal is taken as acceptance of the employee’s resignation for the purpose of benefits payment”.
Additional lump sum payment
Significantly, in terms of lump sum payment, the revised regulation has clarified that the retirees shall be allowed to access additional lump sum after the payment of initial lump sum provided that there are additional inflows of funds into the RSA from the employers.
However, the additional remittances shall first be applied to augment pension up to 50 percent of the retiree’s final salary while the balance may be paid out as lump sum.
Where the retiree’s pension is already up to 50 percent of final salary, the retiree may choose to collect the entire additional remittances as lump sum. Where the additional inflow into the RSA of a retiree-on-Retiree Life Annuity (RLA) is not up to 4100, 000 the amount shall be paid directly into the retiree’s bank account, subject to the Commission’s approval.
RSA consolidation before payment of benefits
The Revised Regulation has also clarified that the RSA must be consolidated before retirement benefits can be accessed. A retiree shall only be entitled to access his or her retirement benefits upon consolidation of his or her RSA. The components of an RSA at retirement shall consist of accrued pension rights or pre-act benefits (if any) for employees that were in employment before the commencement of the CPS, employer/employee pension contributions, returns on investment and fixed portion of voluntary contributions (if any).
The new regulation mandates the PFA to take necessary steps to liaise with the employer and other relevant parties, to ensure that all the entitlements of a retiree or deceased person is credited to his/her RSA for the purpose of determining the final RSA balance, before processing of benefits.
Accrued pension benefits for private sector contributors
Also, the Revised Regulation has made provision for the administration of Pre-Act Benefits, which are the accrued pension benefits of contributors mainly in the private sector in line with the employer’s trust deed prior to the commencement of the CPS in June 2004. Any employee who retires and has pre-act contributions shall notify the PFA of his/her intention to withdraw the Pre-Act balance. A PFA shall request the retiree to provide necessary documents and an application to access the Pre-Act part of the RSA balance. Consequently, the Pre-Act balance can be paid to the retiree separately, prior to selecting either Programmed Withdrawal or Annuity modes of accessing retirement benefits”.