National Pension Commission (Pencom) has announced that low-income earners can now choose between withdrawing their entire retirement savings or continuing to receive their current pension.
A memo dated November 27, 2024, and signed by A.M. Salem, Head of the Surveillance Department at Pencom, outlined the new regulation.
This change follows President Bola Tinubu’s signing of the National Minimum Wage Bill into law on July 29, 2024, which raised the minimum wage from N30,000 to N70,000.
“Consequent to the above, Pension Fund Administrators are hereby directed as follows; To apply N70,000.00 being the current National Minimum Wage in processing of retirement benefits in line with the provisions of Section 4.1 (g) of the Regulation.
“Retirees whose monthly/quarterly pensions are less than N23,333.33, representing one-third of the current minimum wage of N70,000.00, be allowed to choose between receiving the outstanding balance in their RSAs en bloc or continuing to receive their current monthly/quarterly pensions pending the commencement of the Minimum Pension Guarantee,” it said.
Previously, retirees were allowed to withdraw only one-third of their total Retirement Savings Account (RSA) balance. Now, in light of the wage hike, the new regulation provides that if a retiree’s RSA balance cannot support a monthly pension of at least N23,333.33—one-third of the new minimum wage—they are entitled to withdraw the entire balance of their savings.
Pencom’s directive to pension fund administrators and custodians also states that retirees who opt for the lump sum withdrawal must provide the necessary documentation, including a signed consent form and a formal application letter.
This change is seen as a response to the growing need for adequate retirement savings, especially for individuals whose pension balances fall short of meeting the new minimum wage standard.
The updated regulation aims to provide retirees with greater flexibility and financial support as the Minimum Pension Guarantee is phased in.
Pencom emphasised the need for compliance with the new rules effective immediately.
“The payment schedule in the template is attached as Appendix 1. You are, therefore, required to take all necessary measures to ensure full compliance with this circular. This circular takes immediate effect.”
