PenCom makes three changes to Voluntary Contribution guidelines for RSA holders
National Pension Commission
PenCom makes three changes to Voluntary Contribution guidelines for RSA holders
Nike Popoola
The National Pension Commission (PenCom) has introduced three changes to the Voluntary Contribution (VC) guidelines for workers and other contributors under the Contributory Pension Scheme, fact obtained by Daily Economy has revealed.
It was gathered on Friday that the Pension Fund Administrators (PFAs) were already making efforts to start enlightening their Retirement Savings Account (RSA) holders after the pension regulator communicated these new changes to them.
PenCom describes Voluntary Contribution under the Contributory Pension Scheme (CPS) as, non-obligatory contributions made by any contributor into his RSA.
It states that, “Section 4 (3) of the PRA 2014 provides a platform for an RSA holder to make Voluntary Contributions, in addition to the statutory contributions being made by him and his employer.
“Subject to the Guidelines as may be issued, from time to time, by the Commission, Section 4 (7) of the PRA 2014 also provides for any person who is not ordinarily covered under Section 2(3) of the Act and any person exempted under Section 5 of the Act to participate in the Scheme through Voluntary Contributions.”
The new changes made under the VC guidelines to the PFAs, obtained by Daily Economy affect timeline for withdrawal, accessibility for non-mandatory contributors and tax implications.
Timeline for withdrawal
Old requirement:
Active/Mandatory contributors can only make withdrawals from their VC after the contributions have been retained in their Retirement Savings Account for a minimum of 2 years.
Non-mandatory contributors, such as retirees, exempted contributors, political office holders, employees in an organization with an Approved Existing Scheme (AES), and foreigners can access their VC upon the expiration or termination of their contract.
New requirement:
VCs can now be withdrawn after one year from the date of contribution for both mandatory and non-mandatory contributors.
Accessibility for non-mandatory contributors
Old requirement:
VC for retirees, exempted contributors, political office holders, employees in an organization with an Approved Existing Scheme (AES), and foreigners, shall be retained in the RSA to be accessed at the expiration or termination of the contract.
New requirement:
Non-Mandatory Contributors can access 50 per cent of their VC as contingent withdrawals before their employment/contract expires.
Tax implications
Old requirement:
Tax deductions for mandatory contributors are only made on the income earned when withdrawal is within five years from the date of contribution.
While tax deductions for non-mandatory contributors are applied on both the income earned and principal amount when withdrawal is within five years from the date of contribution.
New requirement:
For both mandatory and non-mandatory contributors, tax deduction is made on only the income earned when withdrawal is within five years from the date of contribution.
According to PenCom, Mandatory Contributors are all active contributors under CPS.
The Non- Mandatory Contributors are employees under Closed Pension Fund Administrators (CPFAs) and AES who were employed before June 2014 that are yet to transit to the CPS; Retired contributors under the CPS who secured another employment after retirement; Retired contributors under Defined Benefit Schemes including those retired under CPFAs and AES (who were employed before June 2014), who secured another employment after retirement; Categories of persons exempted by the Pension Reform Act 2014 i.e. Persons with 3 years left in service as at 25 June 2004, Judges (in line with Section 291 of the Constitution of the Federal Republic of Nigeria) and personnel of the Armed Forces, Intelligence and Secret Services; Foreigners working in Nigeria and making voluntary contributions under the CPS; Partners of Firms/members of religious bodies and non-executive directors of companies.
