The 2014 Pension Reform Acts provides great incentives for the present generation of active workers and those in near-retirement to build a stronger pension for themselves in retirement. Among other incentives the Act makes provision for includes Exemption from tax payment. The Act clearly states that any interests, profits, dividends, investments and other income accruable to pension funds or asset are not taxable. In addition, withdrawal of voluntary contribution is no longer subject to tax if withdrawn within 5 years. In essence, it could be said that there is a free ride to accumulate more funds for retirement.

Since the advent of this contributory pension scheme, the burden of planning for retirement now lies with individual workers and their employers as sponsors. Nonetheless, a larger percentage of Nigerian workers are still currently without any retirement plan and therefore, failed to claim the opportunity or taking advantage of the motivations provided for by the Act. Only about 10 million out of over 60 million Nigerians of active working age contribute to the Pension Scheme. Effectively, this means less than 20% of Nigerians are covered leaving over 80% exposed to social insecurity in their old age. Little did many employees and their employers know the imminent danger of not participating in pension and retirement programs.

Let’s face it, without a plan in place, you stand a good chance of not only leaving money on the table in retirement but also losing money from bad decisions. You’ve got a kind of life you live now while in your active working career years, there is fifty percent chance way up that your life styles and spending life will continue in retirement. But without adequate retirement planning and strategy in place, you risk the danger of falling below your current status.

Why You Should Enrol in a Retirement Plan Without Further Delay

As you earn the income that pays for your current needs and at least some of the things that you enjoy, you may also be thinking about what you’ll be able to afford when you retire—whether your retirement is just around the corner or many years in the future. One of the ways to ensure you’ll have at least some of the income you need is to participate in an employer sponsored retirement savings plan known as Retirement Saving Account (RSA). So, instead of just dreaming about retirement, you should be preparing for it.

The cost of living continues to rise while the world economy is experiencing slow growth in the recent years, there is the likelihood that this snowball into the future. Your living expenses are not in any way shrinking, there is the certainty you might live up to 20 years or beyond post-retirement, which means your medical care expenses will also increase correspondingly. You are also face with little or no stream of incomes at retirement. It is only the strategy you put up now to prepare for life post-retirement and your participation in the employer sponsored saving plan that will guarantee you the quality of life you hope to live, unless you have not started thinking about life after retirement. Now is the time to get the right strategy in place to help you reach your retirement goals.

Strategies Open for You to Save For Retirement.

There are different options open to you to start saving for retirement in addition to the contributory plans sponsored by your employer. Whatever might be your employment orientation, either you are just starting out your career, or you are changing your job, or you are a few years to retirement, or you might be self-employed, you just have to enroll for a program that meet your needs. The following saving programs are open for you to start out on a good note.

Defined Benefit Scheme Plan.

Some employers offer defined benefit plans, most employers in the multinational organisations and multinational oil and gas offer this form of plan. Defined benefit plan promises you a specific income, called a pension, after you retire, typically based on the number of years you work at the job and what you earn. Others offer cash balance plans, which calculate your pension based on a fixed return of an amount contributed each year in your name. If you work in this kind of institutions, be sure you are covered.

Defined Contributory Scheme

Most employers in both public and private organisations offer defined contribution plans. These plans don’t promise a specific pension but provide retirement income based on: the amount that’s contributed to the account; the way the contribution is invested; and, the return the investments provide. The Pension Reform Act, 2014 provides that employers should make 10% while employees make 8% of the total monthly emolument to a contributory account known as Retirement Saving Account with a Pension Fund Administrator whom an employee shall chose. The Act also provides that in any event, the employer chooses to shoulder the contributory plan for her employees, 20% of the employee monthly emolument shall be contributed to the RSA. You just have to find out from your employer if you are covered under this scheme.

Voluntary Contributory Plan

This type of plan allows an individual employee to save extra percentage of his/her income in an account with a PFA whose income again is based on the amount that’s contributed, the way the contribution is invested and the return the investment generate. The Pension Act provides tax incentives for participating in a VC programs, on the proviso that such account shall not be withdrawn within the first 5 years of opening the account. Find out how you can tap into this free offer.

Saving in Investment Securities

Both the capital market and money market offer different investment programs in which you can get involve in to start saving for your retirement. From mutual funds, to Exchange Traded Funds (ETFs), to Bonds, Stocks, Real Estate Investment Schemes, (REITS), Certificate of Deposit (CDs), Treasury Bills, etc. Investing in any of these securities depend on many factors such your time horizon, risk preference and risk profile, your financial goals, liquidity preference, taxes, etc. Please consult your financial advisers before you start your saving program in any of the money market and/or capital market securities. Stock is highly risky you might lose both your principal investment and incomes.

There is no better time for you to start thinking about your retirement years and life after retirement than today.

At RightShore Africa, we provide investment guidance and financial planning for corporate, individuals, and institutional investors. You can work with our dedicated advisors to help you refine your retirement and pension plan for a more holistic and objective review. Contact us today!