No fewer than 108,552 annuitants received N216.66bn lump sum under the Contributory Pension Scheme as of the end of the first quarter of 2023, figures obtained from the National Pension Commission have revealed.
This amounted to about a quarter of the balance in their Retirement savings Accounts with their respective Pension Fund Administrators when they retired.
The PFAs transferred N642.32bn premium to life insurance companies for monthly stipends to the retirees, according to figures obtained by The PUNCH on PenCom’s report on ‘Retirement by annuity in Q1, 2023’.
According to the report, the life insurance companies were paying the annuitants an average monthly stipend of N6.53bn as of the period under review.
In Q1, 2023, PenCom stated in the report that, “A total of 3,505 retirees chose annuity mode of pension payment during the quarter under review.
“A lump sum of N15.23bn was approved for payment to the retirees, while the sum of N26.54m was approved for payment to retiree life annuity providers as premium in return for monthly annuity of N291.80m.”
The Pension Reform Act opened huge business opportunity for the insurance industry by introducing life annuity which underwriters sell to retirees under the CPS.
Under the CPS, retirees have the option to adopt either programmed withdrawal or life annuity retirement option.
Life annuity, according to the Pension Reform Act, is a financial product offered by insurance companies which are regulated by the National Insurance Commission, for a regular income in consideration for the payment of premium from a retiree.
It provides regular pension payments for life as long as the retiree is alive, and it is guaranteed for 10 years in case of death.
NAICOM disclosed in its ‘Bulletin of the insurance market performance’ report for the fourth quarter of 2022 that, “Annuity business contributed gross premium income of about 26.9 per cent to the sector’s premium during the period.
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