Planning for retirement must start when one is in active service. This is done by regularly contributing on a monthly basis to your pension account. Hence, one would have accrued a lot of funds that could be useful as initial capital to start a dream business post-retirement.

However, as you plan retirement, there are certain decisions, as a contributor, you will need to make, that will define your monthly pension entitlement and lump sum at retirement.


Six months to your retirement, you need to approach your Pension Fund Administrator (PFA) to decide which of the exit options you will choose, as required by law.

The Pension Reform Act (PRA) 2014 makes available two broad alternatives when accessing your retirement savings. The two exit options to consider when accessing your retirement savings are; Programmed Withdrawal and Annuity. You don’t have to be coerced by your PFA or the Life insurance company to make a choice. It is a choice that you alone must decide. However, there is a lump sum withdrawal with either the Programmed Withdrawal or Annuity.

Programmed Withdrawal 

Programmed withdrawal is a product offered to retirees by Pension Fund Administrators (PFAs). In addition to a calculated lump sum, it provides retirees a guaranteed income on a monthly or quarterly basis over an expected life span.

Withdrawal is one of the two principal ‘retirement products’ specified by the PRA 2014. It is a product offered by PFA for a periodic payments (monthly/quarterly) to a retiree. It is a structured periodic withdrawal based on the peculiarities of the retiree. The Retirement Savings Account (RSA), balance is spread over expected life span of a retiree.


On the other hand, Annuity Plan is an income replacement product offered to retirees by Insurance Company. Annuity is a series of payments made to person for life following purchase of the plan. (Usually with the proceeds of that person’s Retirement Savings Account under the Pension Reform Act (2014).

A retiree negotiates with insurance company, obtains Annuity Provisional Agreement from the life insurer, which shows premium, monthly annuity guarantee terms, among others. Money leaves RSA to insurance company to pay premium after lump sum payment. The insurance company then commence payment of monthly annuity/pension to retiree.

Lump Sum As Your Initial Business Capital 

However, lump sum is applicable to both Annuity and Programmed Withdrawal. Lump sum is a residual, no fixed percentage amount that may be withdrawn before PW or Annuity, subject to RSA balance and monthly pension. For instance, if you have N6 million in your pension account at retirement, you are entitled to N1.5 million as lump sum which could be instrumental to start your business ideas.


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