SANLAM Life Insurance has advised Nigerian civil servants approaching retirement to consider life annuity policies as a more secure option for managing their pensions.
Victor Ikechukwu, Annuity Manager at SANLAM Life Insurance, made the call on Monday in Enugu during a discussion on pension management. He said life annuities provide retirees with guaranteed income for the rest of their lives, unlike alternative pension drawdown arrangements that may run out over time.
Annuity vs Programme Withdrawal
According to Ikechukwu, annuity policies are regulated by the National Insurance Commission (NAICOM) and structured to ensure that retirees receive fixed pension payments for as long as they live.
“An annuity is a pension package paid to a retiree for life. It is programmed and continues until death,” he said.
He contrasted this with the Programme Withdrawal option offered by Pension Fund Administrators (PFAs), under which retirees receive periodic payments drawn from their Retirement Savings Account. Under that model, payments cease once the accumulated funds and investment returns are exhausted.
“Once the money is exhausted, the pension stops automatically. That is the major difference,” Ikechukwu explained.
Call for Greater Transparency
Ikechukwu urged retiring civil servants to request a pension payment template at the point of retirement. According to him, the document outlines available pension options, governing rules, and details of gratuity payments.
The template typically presents two options: the Annuity Policy and the Programme Withdrawal Policy.
He argued that annuities often provide higher monthly payments and function similarly to life assurance policies, offering retirees long-term income security.
“The difference between the Annuity Policy and the Programme Withdrawal Policy is often not properly explained, denying retirees the opportunity to make informed decisions,” he said.
Ikechukwu alleged that some pension managers default retirees into Programme Withdrawal arrangements, allowing fund administrators to continue managing pension balances after gratuity payments have been made.
Duration and Death Benefits
He noted that retirees under the Programme Withdrawal structure may see their funds depleted within 10 to 13 years, depending on investment returns.
However, he clarified that under both annuity and Programme Withdrawal policies, beneficiaries may claim remaining pension benefits if a retiree dies within the first 10 years of retirement.
“If the retiree dies after 10 years, the pension will automatically stop, notwithstanding the policy,” Ikechukwu said, adding that no further claims can be made once the retiree has received gratuity and pension payments beyond that period.
The advisory comes amid ongoing conversations around pension sustainability and retirement planning in Nigeria, as more public sector workers approach retirement age.
(NAN)
