What is the new scheme about and how is it different from the other schemes?

It is a private, fully funded, professionally managed, contributory pension scheme.

What does this mean?

Private means the scheme is built around the private individual, the benefits are that the pension funds are portable and ownership remains of the individual contributor.

Funded means there is a pool set aside to pay your pension funds this means you will not have to worry when you retire how your pension will be paid.

Professionally managed means the assets are managed & invested by Pension Fund Administrators (PFA) licensed by the National Pension Commission (PenCom).

Contributory means both the employer and the employee contribute monthly to the Retirement Saving Account (RSA) of the employee.

What are Retirement Savings Account?

This is a personal account, sort of similar to bank accounts that every employee will open with a PFA. It is into this account that all pension contributions will be paid. Any statutory contributions made into this account are tax-exempt. Legacy PFA will issue a quarterly statement on the status of the RSA to each contributor.

So how does the scheme work?

Each employee is expected by law to receive a pension on retirement. Hence each employee will open an RSA with a PFA. The Pension Fund Administrator (PFA) will give the employee a Personal Identification Number (PIN) and bank details of the PFA to forward to his employer. Every month the employer will remit a portion of the employee salaries(Basic, Housing and Transport) plus the employer contribution

Who is a Pension Fund Administrator (PFA)?

A PFA is an operator licensed by the National Pension Commission (PenCom) to manage RSAs. To become a PFA, extensive due diligence is done on the shareholders of PFA’s to ensure they have not managed any fund that has failed in the past.

So my money will be paid to the PFA?

No, the scheme has segregated the functions of managing the RSAs from that of physical custody of the assets. Your money will be paid to the Pension Fund Custodian (PFC), who will advise the PFA you have chosen and the PFA will instruct the PFC on how the money is to be invested. This segregation is to enhance the safety of the contributors’ pension assets.

So who is a Pension Fund Custodian (PFC)?

A PFC is licensed by PenCom to hold the pension assets in custody. To become a PFC an entity must have N2billion paid up capital and belong to a group that has N125billion in total assets. The PFC will also issue a bond for the total assets they hold for the contributors. This ensures the safety of the assets.

So how do I know which Pension Company is a PFA?

Only PFAs have the letters (PFA) after their names, e.g. Legacy (PFA) etc. These are the only institutions registered by law to manage Retirement Saving Accounts and pension assets.

So can I switch PFA?

Yes, but this can be done only once a year.

What if I change jobs?

Nothing really changes. The RSA remains the property of the contributor for life. You should simply inform your new employer of your PIN number so contributions can be made into your RSA and then advise your PFA of the change.

How much do I have to contribute to my RSA?

The Act specifies a minimum of 7.5% of your monthly Basic Salary, Housing and Transport allowances; except for the military, which requires 2.5%

How much does my employer contribute?

The Act specifies a minimum of 7.5% of your monthly Basic Salary, Housing and Transport allowances; except for the military, which requires 12.5%. Thus the total amount in your RSA every month should be 15%. However your employer can elect to bear the full burden of the contributions provided the total contributions into your RSA are not less than 15% of your monthly Basic Salary, Housing and Transport allowances.

Will this not lead to an increase in the SME’s operational costs?

We can agree that this scheme will allow you attract and retain quality staff. It also provided a planned, way to reward your employee for their long period of service and carried tax benefits. Also the Federal Government has made it mandatory for any company willing to do business with it to show full compliance with the Pension Reform Act specifically, enrolling and fund the accounts of her employees.

Who can participate in this scheme?

Every employee in the public service, as well as persons under Section 291 of the constitution of the FGN.
Every employee in the private sector who is in the employment of an organization, which has 5 or more workers.

What is the difference between Defined Benefit and Defined contribution?

Under a Defined Benefit (DB) scheme, the final pension a contributor can receive is pegged. However under a Defined Contribution (DC) the contributions paid in monthly by the employer and employee are fixed, hence the final pension is a function of how well the contributions have been invested

How safe are the contributions made?

The contributions are kept by the PFC while the Funds are invested by the PFA under close supervision of PenCom. This arrangement ensures a clear segregation of duties.

How do we make payments?

We have customized tellers in all UBA Branches across the Federation which you can use to make payments. You must indicate that the payments are voluntary in nature and notify your PFA that you have made AVC. Legacy (PFA) Bank details are below:

BANK NAME: UBA PLC
BRANCH: UBA PLC 172, Awolowo Rd, Ikoyi
ACCOUNT NAME: UBA PENSION CUSTODIAN/ LEGACY PENSION
ACCOUNT NUMBER: 01480010000033.
SORT CODE: 033

You can make payment to any UBA Plc branch across the federation. Once you make a payment contact your account officer and give him a copy of the teller and schedule and also give a copy to the receiving bank.

But what if the PFA fails?

Your savings will not be affected as the PFC holds the assets. Your savings are however invested in a diversified portfolio and in strict accordance with PenCom issued regulations on investment.

When will my employees have access to their pension contributions?

Either when they retire according to terms and conditions of service or when they attain the age 50, whichever comes later.

What is a Programmed withdrawal?

A programmed withdrawal is the method by which an employee collects his accumulated benefits in periodic sums for the length of his estimated life span.

What is an Annuity?

An annuity is an Income purchased from a licensed life insurance company with monthly or quarterly payments during the lifetime of the retiree

What documentation do I need to provide to my employees to enable them access their pension?

1.    A letter from the employer acknowledging receiving your employees  letter of retirement
2.    Last Pay slip

Will I still pay gratuities under the new scheme?

The employer may pay gratuity over and above the scheme payments. However a retiree can withdraw a lump sum from the balance of his retirement savings account provided the balance after the withdrawal could provide an annuity of fund monthly payments that would not be less than 50% of his monthly pay as at the date of his retirement. Irrespective of the above position, the lump sum must not be below 25% of the final balance.

What Documents do I have to give Legacy Pension in the Event of death of my employee?

1.    Letter from employer of deceased notifying Legacy Pension of death, and introducing the next of kin
2.    Death Notification form: filled by the employer of the deceased. Download form the National Pension Commission Website www.pencom.gov.ng

What are closed pension schemes?

These are private sector schemes that existed before the Act. They can continue to exist if they can show they are fully funded and that any shortfall is made up within 90 days. The pension assets must be segregated from the assets of the employer /company and transferred/held by a custodian.

The employer must have managed pension assets for at least 5 years before the commencement of the Act. Most importantly scheme asset must be N500m and above.

So why should my employees choose Legacy?

1. You have retired and have a healthy cash accumulation in your RSA, Legacy will offer you a Personal Programmed Withdrawal Plan PPWP that will allow you select a programmed withdrawal product that allows fixed monthly or quarterly payments into any account of your choice to provide for your retirement, fund a child education through school or repay a mortgage loan. Thus as you now working for your pension, Legacy will make your pension “work” for you.
2. The Dutch Financial Services Group ING of the Netherlands set up legacy under a Technical Partnership service. ING has considerable experience in Pensions and Insurance and is present in 50 countries. This means our processes risk management and investment management service is built on world-class structures.
3. Considering the contributory scheme as similar to the Chilean model Legacy uses the Sonda AFP.NET software. This software was developed in Chile has been in use in the Americas and Eastern Europe.
4. We are partnering with a reputable, local bank, FCMB plc which is Nigeria best investment bank.
5. Our contributors have access to a unique suite of financial advisory services under the FCMB Wealth Management brand these services include Mortgage advisory, Trust services, Life Assurance, Stock broking and traditional banking services.
6. You can access your RSA status through 4 separate means: Physically visiting Legacy, accessing our website, calling into our call centers through your mobile phone.

What do I do next?
Fill out the Legacy RSA Form.