Figures from the National Pension Commission have disclosed that by the end of the first quarter of 2023, a substantial number of 108,552 annuitants received a total lump sum of N216.66bn under the Contributory Pension Scheme. This amount constituted approximately one-fourth of the balance present in their Retirement Savings Accounts with their respective Pension Fund Administrators at the time of their retirement.
As part of the process, the Pension Fund Administrators transferred a sum of N642.32bn to life insurance companies to provide the retirees with monthly stipends. According to the data obtained from PenCom’s report on ‘Retirement by Annuity in Q1, 2023’, the life insurance companies were disbursing an average monthly stipend of N6.53bn to the annuitants during the period under review, ensuring a steady income for their retirement years.
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 introduction of life annuity through the Pension Reform Act has created a significant business opportunity for the insurance industry. Under the Contributory Pension Scheme (CPS), retirees have the choice to opt for either programmed withdrawal or life annuity as their retirement option.
As defined by the Pension Reform Act, life annuity is a financial product provided by insurance companies, regulated by the National Insurance Commission (NAICOM). It offers retirees a regular income in exchange for premium payments. This arrangement ensures consistent pension payments throughout the retiree’s lifetime, with a guarantee of 10 years of payments in the event of the retiree’s death.
According to the fourth-quarter 2022 ‘Bulletin of the Insurance Market Performance’ report by NAICOM, annuity business contributed approximately 26.9% of the sector’s premium income during that period. This highlights the significant role played by life annuity in the insurance industry.
