Retirees under the Contributory Pension Scheme (CPS) have collectively invested N798.58 billion in life annuity as of the second quarter of 2024, according to data from the National Pension Commission (PenCom). This marks a 20 percent increase from the N665.13 billion invested by 111,708 retirees opting for life annuity in the corresponding period of 2023.
The data highlights that a total of 129,435 retirees have now opted for life annuity, a financial plan designed to provide them with monthly or quarterly pensions for life. The pension funds are accumulated through employer and employee contributions into the Retirement Savings Accounts (RSAs) of employees throughout their working careers.
PenCom also revealed that Nigerian states have remitted over N236.7 billion to the pension scheme between January 2020 and the second quarter of 2024, ensuring a continuous stream of funds into the system.
According to the Pension Reform Act of 2014, retirees are required to procure an Annuity for Life Policy or opt for Programmed Withdrawal, with their accumulated funds forming the basis for their retirement income. The purpose of these options is to ensure retirees receive a steady income throughout their retirement years.
Niyi Onifade, Managing Director of Heirs Life Assurance Company, explained that annuity plans guarantee retirees a steady flow of income, either monthly or quarterly, for as long as they live. This provides retirees with financial security and peace of mind, knowing that their income needs will be met, no matter how long they live.
Onifade also emphasized the importance of retirees understanding the financial options available to them as they prepare for their retirement. He added that the annuity plan eliminates the worry and uncertainty many retirees face regarding the future.
The uptake of retiree life annuities continues to rise as awareness grows regarding the benefits of the scheme. PenCom’s second-quarter data shows that 68,048 of the annuitants were former federal government employees, 18,837 were state government employees, and 42,514 came from the private sector.
A closer look at the data revealed that the retirees collected N294.12 billion as lump sums from their RSAs, while insurance companies disbursed N8.06 billion in monthly pension payments during the same period. Additionally, 5,312 retirees moved N39.42 billion in premium payments to life insurance companies, compared to 4,277 retirees who transferred N30.11 billion in the first quarter of 2023.
AIICO Insurance Plc, one of the leading underwriters of annuity products in Nigeria, disburses around N1.3 billion monthly to annuitants. Gbenga Ilori, Executive Director and Head of Retail Business at AIICO, noted that the company’s annuity product is designed to provide retirees with peace of mind by offering guaranteed monthly payments for life.
“We are proud to be part of the financial journey of retirees, ensuring their stability during retirement through our annuity product,” Ilori said.
AIICO has also expanded its annuity portfolio through strategic acquisitions, including the annuity portfolios of Royal Exchange Assurance and Tangerine Africa. Managing Director/CEO of AIICO, Babatunde Fajemirokun, stated that the acquisition of Tangerine Africa’s annuity portfolio is a critical part of the company’s growth strategy, which enhances its ability to deliver exceptional value to customers.
Chika Onwunali, a partner at Premium Debate, highlighted that the growing demand for annuities is partly driven by increased life expectancy and the rising cost of living. With people looking for ways to secure a stable income for life, annuities have become a more attractive option for retirees.
Onwunali also noted that regulations introduced by PenCom have made annuities more appealing to consumers, although he mentioned that individual insurers often offer more incentives compared to programmed withdrawal options under the pension regulation.
The future looks promising for retirees opting for annuity plans, as awareness and demand continue to increase, securing financial stability during retirement years.
