“I Have Over N5 Million Sitting Idle in My Pension Account. How Do I Withdraw This?” Expert Advises

• A Nigerian lady wants to quit her 9-5 job and set up a business so she can be her own boss
• She has over N5 million in her pension account but does not know if the fund could be accessed
• An expert speaks on conditions in which the funds in a pension account can be withdrawn prior to retirement

Legit.ng journalist Zainab Iwayemi has over three years of experience covering the Economy, Technology, and Capital Market.

A Nigerian lady who wishes to remain anonymous said she is starting her own business but needs money to set it up.

She is considering withdrawing funds accumulated in her pension account to start the business.

Anonymous asks:

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“I have worked in corporate organizations for 10 years during which I have been able to grow my pension account to over N5 million.

"I am looking to resign from my current job and set up my own business. How do I access the N5 million I have in my account for this purpose."

Samuel Oyekanmi is a macroeconomic analyst with over five years of experience. He is vast in carrying out market, business and academic research that cuts across the pension industry, banking and other financial institutions.

Ideally you cannot withdraw your money from your account until you get to retirement age.

But of course there are exemptions. One of them is if you are participating in the additional voluntary contributory (AVC) scheme. This means that aside from the normal 8% and 10% that you and your contributors contribute, you can decide to have an addition from your salary and have an arrangemnet with your employer to remit either portion of their salary into your account just to increase what you have as retirement benefit.

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Based on that, you can access some portion of your contributory money once every two years.

However, it is important to know that contributors in active service can only withdraw 50% of their VC after the contributions have been retained for a period of 2 years in their RSA. Subsequent withdrawals will be on the incremental contributions remitted after last withdrawal date.

Cases of lost jobs

Another way to access part of your fund is if you lose your job and you are not able to get another in four months, you get a portion of your pension fund to a maximum of 25% of the total amount.

Another way which is even more profound is the ability to take your fund as balance for payment for equity contribution of residential mortgage. So if you want to get mortgage, you can access a certain amount.

According to PenCom, the maximum amount RSA holders can apply as equity contribution for a residential mortgage is 25% of the total RSA balance as of the date of application.

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If you want to access this, you can just send the mandate to your PFAs. They do recapturing for you before you can be able to do this as laid down by regulation.

Withdraw or not to withdraw?

The best move often times is to take a loan. If you understand that the business move is viable but of course you need some level of equities. In terms of cost of funding, you know that debt is the cheapest so you can as well just go to the bank for loan.

Disclaimer: Advice given in this article is general and is not intended to influence readers' decisions about solving problems. Readers should always seek their own professional advice that takes into account their own personal circumstances before making any decision.

Do you have a story to tell? Want an expert's advice? Please email us at ask.an.expert@corp.legit.ng with 'Ask an expert' in the subject line.

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Only 1 out of 10 Nigerians have access to pensions

Legit.ng reported that Hamisu Bala Idris, the managing director of Norrenberger Pensions Limited, has exposed the extent of pension reach in Nigeria.

The disclosure follows several reports of pensioners across different parts of the country regularly lamenting the non-payment of their pensions, especially by state governors.

During a retirement planning seminar organised to empower individuals close to retirement and retirees for a financially secure future after retirement in Abuja, Idris disclosed that only 10% of Nigerians have access to pension schemes, as reported by Vanguard.

Source: Legit.ng