If only I knew

By April 10, 2019 No Comments

Abigail was caught in the vicissitude of life as she was out of employment with A & B Limited after years of meritorious service. She had hoped for a better exit having put in consistent effort in helping the organization to reach its peak in the financial industry. In good fate, she attempted to get back to employment through submission of job applications to several blue-chip organizations considering her impressive resume, all to no avail.

Four months after her exit from employment, frustration began to set in as she had exhausted most of her savings and was left with the only option of liquidating her fixed deposit investment. While grappling in the thought of liquidating her fixed deposit investment, she consulted Tina, her best friend for a loan as an alternative source of starting her own business while awaiting another job offer. Unfortunately, Tina could not help with the loan as she had recently paid her children’s school fees.

However, Tina advised Abigail to contact her Pension Fund Administrator (PFA) to access 25% of her Retirement Savings Account (RSA) balance amounting to N2.5 million, an option she could not resist compared to liquidating her fixed deposit investment which is of less value and insufficient to accommodate her current lifestyle. Hence the 25% Lumpsum withdrawal idea seemed like the best option at the time. She swiftly jumped at the idea as she contacted her PFA to kick start the process of accessing 25% of her RSA balance.

She was engaged further by the Customer Experience Officer at the PFA and was offered professional advice with respect to pension withdrawals. However, she insisted on the 25% withdrawals, noting that her friend had already offered complete advice on pension withdrawals.

Upon receipt of regulatory approval from the National Pension Commission (PenCom), Abigail received 25% of her RSA balance sooner than she expected and was elated with the prompt process as the value received, afforded her the opportunity to meet her immediate needs thanks to Tina’s advice.

Barely a month after the receipt of 25% Lumpsum payment, Abigail accepted a lucrative job offer from a new Credit Finance Company. Unfortunately, the company was hit by the global economic meltdown within three years of Abigail’s employment. This resulted in the fold up of the Credit Finance Company, and subsequently, she was out of job again.

Thereafter, she considered withdrawing from her RSA balance which had risen in value to the sum of N20 million. Out of excitement, she immediately approached her PFA to apply for 25% of her RSA balance again (after 4 months of inactive employment), but to her greatest disappointment her application was denied as she was informed that she could only access 25% of her RSA ‘‘once in a lifetime if she is less than 50 years of age,’’ in line with the Pension Reform Act 2014.

Abigail left her PFA disappointed but better enlightened. She realized that 25% of RSA withdrawal is not always an immediate resolution to temporary loss of job, as she would have accessed more value in withdrawal later if she had not withdrawn initially from her Retirement Savings Account.

Key Highlights:

· 25% RSA withdrawal might not be the immediate resolution to temporary loss of job.

· Always seek professional advice to make an informed financial decision as the most convenient option may not always end up as the best alternative