For many organisations and employees, workplace pensions are a key part of the employee benefits package. Besides salary, pensions are also usually the costliest element of employee compensation. For these reasons, pension provision might be a key strategic issue for the organisation.
Retirement saving pension plans such as defined contribution plans are increasingly an integral part of most countries’ overall pension system, and in some countries, they are the main component of their pension system. This means that overall retirement income adequacy greatly depends on the pension benefits stemming from these plans.
A robust workplace pension offers employees a long-term savings plan with many benefits. It also helps to attract and retain top talent and offer your workforce financial wellbeing and peace of mind.
As a Nigerian worker, setting up a pension fund is an essential step towards securing worker financial future. A pension fund is a type of investment fund that is designed to provide you with a regular income in your retirement years. In Nigeria, the Pension Reform Act of 2014 made it mandatory for employers to set up a pension scheme for their employees.
A pension is a fund into which a sum of money is added during an employee’s employment years and from which payments are drawn to support the person’s retirement from work in the form of periodic payments. A pension may also be a ‘defined benefit plan’, where a fixed sum is paid regularly to a person, or a ‘defined contribution plan’, under which a fixed sum is invested that then becomes available at retirement age.
Pensions should not be confused with severance pay; the former is usually paid in regular installments for life after retirement, while the latter is typically paid as a fixed amount after involuntary termination of employment prior to retirement. So, a pension plan is a retirement account where employers and employees make monthly contributions.
In Nigeria, employers contribute 10 per cent of the salary and the employee contributes eight per cent, this is known as a defined contribution scheme. The employee receives the money when he/she retires.
According to chief executive, Stanbic IBTC Pension Managers, Olumide Oyetan, as an organisation, one of our main objectives is to ensure that our clients retire well, which aligns with enabling our customers become homeowners. We leverage customer data and insights which help us to be proactive in meeting their needs. Our team works diligently to ensure that our clients can access a portion of their pension savings as equity contribution towards residential mortgage applications, if they meet the required conditions as prescribed by PenCom.
Essential Steps To Set Up A Pension Fund In Nigeria
Choose A Pension Fund Administrator (PFA): The first step towards setting up your pension fund is to choose a Pension Fund Administrator (PFA). A PFA is a company that manages pension funds on behalf of workers. In Nigeria, there are currently 22 licensed PFAs to choose from.
Complete Your Pension Fund Registration Form: Once you have chosen a PFA, you will need to complete your Pension Fund Registration Form (PFR). This form contains your personal details such as your name, date of birth, and contact information. You will also need to provide details about your employer, such as their name and address. Your PFA will provide you with the PFR form, and you will need to complete and submit it along with any required documentation.
Make Contributions: As a Nigerian worker, you are required to make contributions to your pension fund. Your employer is also required to make contributions on your behalf. The minimum contribution rate is 18 per cent of your monthly salary, with eight per cent contributed by your employer and 10 per cent contributed by you. However, you can choose to contribute more than the minimum if you wish. Your contributions will be deducted from your salary each month and deposited into your pension fund account.
Monitor Your Investment Performance: Your pension fund is invested in various assets such as stocks, bonds, and real estate. The performance of your pension fund will depend on the performance of these assets.
Nominate Beneficiaries: In the event of your death, your pension fund will be paid to your beneficiaries. It is important to nominate your beneficiaries to ensure that your pension fund is paid to the right people.
Plan For Retirement: Setting up a pension fund is just the first step towards securing your financial future.
Meanwhile, organization should make sure staff understand the value of their pension. If one of the origination’s pension strategy goals is to increase competitiveness of the benefits package, then it is vital for the company to communicate its value to applicants and staff.
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