The National Pension Commission (PenCom) and the National Insurance Commission (NAICOM) on Tuesday signed a Memorandum of Understanding (MoU) to revise a regulation on Retiree Life Annuity and guidelines on Group life Insurance policy.
Mr Peter Aghahowa, Head, Corporate Communications Department, PenCom said in a statement that the regulation was for employees and Contributory Pension Scheme (CPS) retiree pack.
Aghahowa explained that the revised regulations and guidelines provide clarity on the Provisions of the Pension Reform Act (PRA) of 2014 in areas relating to Retiree Life Annuity.
He said that they focus on guiding stakeholders to make an informed decision, ensure the safety of the Annuity funds and assets, address concerns of mis-spelling and de-marketing by pension and insurance operators.
According to him, the guidelines will also bring stability into the financial sector of the economy.
“Today’s landmark event is the outcome of the collaborative efforts of PenCom and NAICOM, ” he said.
Know that an annuity is an income purchased from an approved life insurance company which provides monthly or quarterly income to the retiree during his/her lifetime.
Steps to take on Retiree Life Annuity
- Notify your PFA (if you intend to buy Annuity with your RSA balance) of your intention to retire within 6 months to your retirement .
- Obtain from your PFA your projected RSA balance
(projected to your retirement date).
- Obtain annuity quotes and provisional agreement from the insurer & present to your PFA to ensure the release of your fund to the insurer or pay a lump sum.
- Annuity contract will be executed within 21 days of payment.
Facts about Retiree Life Annuity
- The income is determined by the purchase price, age and the choice of plan.
- You can buy both Life Annuity and Programmed Withdrawal with your Retirement Savings Account (RSA).
- You can only have a change of annuity provider after 2 years of commencing the contract.
- If an annuitant dies within the guaranteed period and there is a spouse option in force, the surrender value for the guaranteed period is paid lump sum and spouse begins to take income from the end of the guaranteed period.
- A mortality check is done to confirm that the annuitant is still alive.
- After Life Annuity contract has been executed, the spouse’s age cannot be changed because that determines the start income.
- Your income is determined from the outset and cannot be changed mid-way
- You can buy as many Life Annuity contracts as you can afford.
- Income from a Life Annuity contract is tax-exempt, being insurance policy.