Did you know you can now access the contingent portion of your Voluntary Contributions one year from the date the voluntary contribution was made?
PENCOM recently released a circular on the revised guidelines for Voluntary contributions (VCs) and below are highlights for note.
What is Voluntary Contribution?
Voluntary Contributions are non-obligatory contributions made by workers and retirees under the Contributory Pension Scheme (CPS) through their employer to enhance their pension.
Who is eligible?
1. Employees making mandatory contributions under the CPS.
2. Workers/retirees in organizations with Closed Pension Fund Administration or Approved Existing Scheme (AES).
3. Persons who retired or were disengaged from CPS.
4. Retirees under the defunct Defined Benefit Scheme.
5. Members of the Armed Forces, Intelligence, and Secret Services.
6. Appointed or elected officials.
7. Foreigners residing and working in the formal sector in Nigeria.
How do I start Voluntary Contributions?
Choose a contribution amount that works for you. Then, inform your employer to add this agreed amount to your pension contributions monthly, quarterly, or biannually. You can monitor your contributions easily from home or your office via the Pensure mobile app or through our instant service assistant, LISA.
So, what does this revised guideline mean for you as a Contributor?
This is a significant development for contributors. Previously, VCs had to be retained for two years before withdrawal. However, the new policy now allows you to
- Withdraw your Additional Voluntary Contributions every year.
- Plan and achieve your projects within the stipulated period.
- Access funds sooner to align with specific financial goals.
- Guarantees you huge savings on personal income tax.
- Tax will not be charged on your principal contributions. Only accrued income shall be subjected to tax in line with section 10 (4) of the Pension Reform Act (PRA) 2014 which states, “any income accrued on voluntary contributions shall be taxable in accordance with relevant tax laws where the withdrawal is made before the end of five (5) years from the date the voluntary contributions was made for mandatory and non-mandatory contributions.”
To learn more about other benefits of VCs, kindly contact our Help Centre here.