You Can Only Withdraw From Pension Contributions Once In 2yrs — PENCOM

National Pension Commission, PenCom, has said the Pension Reform Act, 2014 allows employees under the Contributory Pension Scheme, CPS, to contribute voluntarily in addition to the mandatory contributions into their respective Retirement Savings Account, RSA, to augment their pension at retirement. The Act also allows exempted employees from CPS to participate involuntarily in the CPS subject to a guideline issued by the Commission.

Meanwhile, the Commission said it has observed a tendency for requests for withdrawals by Pension Funds Administrators and especially the significant amount withdrawn, usually within a short interval of lodgment in the RSA both of the mandatory and exempted contributors thereby defeating the purpose of voluntary contributions which is meant to enhance pension at retirement adding “also the short intervals between the date of contributions and withdrawals, results in significant tax payable to the relevant tax authorities.” To check this tendency, PENCOM said all PFAs/PFCs (Pension Funds Custodians) must ensure that “withdrawals from voluntary contributions is allowed once every two years from the last approved withdrawal date.

Subsequent withdrawals shall only be on the incremental contributions from the date of last withdrawal. For mandatory contributors, the amount remitted as voluntary contributions shall be as follows: 50% shall be treated as contingent, available for withdrawal within the stipulated timeframe of 2 years. Taxes would be deducted on income earned in line with Section 10 {4} of the PRA 2014. The balance of 50% shall be fixed for pension and utilized at date of retirement to augment the contributor’s retirement benefit.” Foreign contributors The commission says “The time frame for withdrawal of once every 2 years in clause 5 {a} above shall be adopted.

The contributor is allowed to withdraw all the funds in his/ her account after two years of contribution, subject to deduction of taxes on both income earned and principal when withdrawal is made in less than five years of the contribution. PFAs shall forward requests for approval to the commission using the revised schedule for voluntary contribution withdrawals. Both PFAs and PFCs are required to inform the Economic and Financial Crimes Commission of any single lodgment of N5 million and above. Henceforth, all tax deductions shall be remitted to the relevant tax authorities within 21 days after the end of the month of deduction and render returns to the Commission twice yearly of such remittance”.