Lagos: Mr Ivo Takor, a legal expert, has advised retirees under the Contributory Pension Scheme (CPS) to carefully evaluate their options under Section 7(1) of the Pension Reform Act 2014. Takor, Vice President of the Human Rights Committee, Nigerian Bar Association (NBA), Epe Branch, gave the advice while speaking with the News Agency of Nigeria (NAN) in Lagos on Thursday. He said the decision between programmed withdrawal and annuity for life carried significant financial and legal consequences.
According to News Agency of Nigeria, Takor explained that the framework of the law affects income stability, risk exposure, estate planning, and contractual obligations. Section 7(1) provides that a holder of a Retirement Savings Account (RSA), upon retirement or reaching the age of 50 years, has options for accessing their funds. The retiree may choose a programmed withdrawal, managed by a Pension Fund Administrator (PFA), or purchase an annuity for life from a life insurance company licensed by the National Insurance Commission (NAICOM).
Retirees may also take a lump sum, provided that the residual balance supports withdrawals or an annuity yielding at least 50 per cent of their last annual salary. This provision, mandatory in character, prohibits total withdrawal of retirement savings and is designed to ensure income security in retirement.
Under Programmed Withdrawal, retirees maintain control of their RSA funds with continued investment under regulatory guidelines. Periodic payments are based on actuarial life expectancy and projected returns, with the PFA holding fiduciary responsibility for fund management. However, retirees remain exposed to market-linked risks, and payment levels may fluctuate depending on fund performance.
Conversely, an annuity for life involves transferring RSA funds to a licensed insurer, creating a contractual obligation guaranteeing lifetime periodic payments. Once purchased, the transaction is generally irrevocable, and the retiree relinquishes investment control while the insurer assumes longevity risk.
The statutory 50 per cent minimum pension safeguard prevents premature depletion of retirement savings, ensuring income continuity and promoting financial sustainability in old age. Takor advised that retirees seeking predictability and protection from market volatility might prefer an annuity, while those willing to participate in regulated investments with potential fluctuations might opt for programmed withdrawal.
The law does not favour either option but preserves retirees’ right to make an informed election. Retirement benefits represent deferred earnings accumulated over decades of service. The choice under Section 7(1) should be made deliberately, knowledgeably, and with full appreciation of its legal implications.
Takor urged retirees to review annuity contracts carefully, request detailed benefit projections from PFAs, and seek independent financial and legal consultation before finalising their decisions. The Pension Reform Act 2014 deliberately preserved choice within a regulated structure, emphasising that it does not prioritise one option over the other.