Retirement is an inevitable phase of life that every worker looks forward to, however, what most people fail to prepare for is the financial aspect of retirement.
In Nigeria, one popular way of preparing for retirement is through the Contributory Pension Scheme (CPS), which was introduced in 2004.
Under this scheme, workers contribute a percentage of their income towards their retirement savings, and upon retirement, they have two options for receiving their benefits which are Annuity or Programmed Withdrawal.
Difference Between Annuity and Programmed Withdrawal
An annuity plan is a financial product that guarantees a steady stream of income for the rest of a person’s life.
It is essentially an insurance product that guarantees income to the pensioner until death, and if the pensioner dies before ten years, their beneficiaries will still be paid.
Programmed withdrawal, on the other hand, does not guarantee lifelong payments. Instead, payments are made based on an “Expected Life Span,” which ranges from a minimum of 10 years to a maximum of 18 years.
If, for instance, your expected life span is 12 years while on programmed withdrawal, this means you can expect to receive payments for 12 years only.
After that, payments will cease, even if you live for another 30 years and you know the financial implication of that.
In addition, the length of time a retiree is paid under programmed withdrawal is subject to the economy of the country.
The payments may stop after 11 years or 15 years or a maximum of 18 years depending on the economy and “expected life span”.
It is for this reason that many people prefer and switch to Annuity, where they are guaranteed payment for the rest of their lives without interruption.
Another significant reason for this preference is the fear of outliving their retirement savings.
An annuity provides pensioners with a guaranteed income for life, which means they do not have to worry about running out of money in their old age.
This financial security and peace of mind are essential to retirees who want to enjoy their retirement without financial stress.
It may be interesting to also discover that Annuity pays a higher amount of salary compared to Programmed Withdrawal.
Many people are still in programmed withdrawal because it is the default option after retirement, and they lack knowledge of the better option which is Annuity.
If people were aware of the risks involved in programmed withdrawal and the benefits of switching to Annuity, they would not think twice before making that decision.
Summary Of Annuity Vs Programmed Withdrawal
An annuity is a retirement savings option that provides a fixed income for life no matter how long you live, while programmed withdrawal allows you to withdraw a lump sum of money over your “expected life span” according to them and it is between 10 and 18 years.
An annuity offers a guaranteed source of income for life, while programmed withdrawal has the risk of running out of money if you live longer than expected or if the economy goes bad.
Annuity also usually pays a higher amount compared to programmed withdrawal, making it a more secure option for retirees who want a stable retirement income.
In general, Annuity provides greater financial security and peace of mind, which is why it is a popular choice among many Nigerian pensioners.
Still Confused About Annuity And How It Work?
Are you still confused about Annuity and how it works? Do you want to learn more about this retirement savings option and how it can benefit you in your old age?
We understand that navigating the world of retirement savings can be confusing and overwhelming, which is why we’re offering a free consultation to help you understand Annuities better.
One of our team of experts will provide you with all the information you need to make an informed decision about your retirement and how to secure your financial future.
During the consultation, we’ll explain how Annuity works and the different options available to you.
We’ll also answer any questions you may have about Annuity, such as how much income you can expect to receive and how long it takes to switch.
We believe that everyone deserves to enjoy a comfortable and financially secure retirement, and an Annuity is an excellent option for achieving this.
So why wait? Contact us today at 08061661966 to have your free consultation and take the first step towards a brighter retirement future.
How to switch From Programmed withdrawal to Annuity
Are you a retiree currently running on programmed withdrawal but now wish to switch to Annuity instead?
Don’t worry, it’s easy to switch and enjoy a more secure retirement plan.
Here Are The Simple Steps To Take
- Contact us at 08061661966, and we’ll come to you physically, wherever you are in Nigeria to enlighten you more about Annuity.
- We’ll guide you through the entire process and be with you through every step, making it stress-free for you.
- We’ll help you choose the best Insurance company in Nigeria that has the highest rate for Annuity.
- We will also take care of all the paperwork and handle the switching process from start to finish, so you don’t have to worry about anything at all.
- We’ll carry you along on every single process and step because transparency is our topmost priority.
The programmed withdrawal comes with the risk of running out of money, leading to stress and anxiety.
An annuity can provide retirees with a guaranteed source of income for life, greater financial security, and peace of mind.
An annuity offers higher monthly payments in comparison to programmed withdrawal making you get a more appealing monthly pay than the amount you are currently getting.
We understand the importance of financial security in old age and offer an extremely easy process to help retirees make the switch to Annuity.
So if you’re a retiree who wants to escape the old-age financial crisis, don’t wait any longer; contact us today, and let’s make the switch to Annuity together.
Frequently Asked Questions About Annuity And Programmed Withdrawal
Below is a list of questions gathered from Nigeria pensioners about annuity and programmed withdrawal
What Is Retiree / Pension Annuity?
An annuity is a financial product that provides a fixed or variable stream of income payments to an individual for the rest of their life.
What Is Programmed Withdrawal?
A programmed withdrawal is a retirement income option that allows an individual to withdraw a fixed percentage of their retirement savings at regular intervals over a specified period until it is exhausted.
What Is The Difference Between Annuity And Programmed Withdrawal?
An annuity provides a guaranteed income stream for life, while programmed withdrawal allows for periodic withdrawals of a fixed percentage of the retirement savings until it is exhausted.
How Does Annuity Work In Nigeria?
In Nigeria, an individual can purchase an Annuity from an insurance company using their retirement savings.
The insurance company will then provide regular income payments to the individual for the rest of their life.
What Are The Advantages Of Annuity In Nigeria?
An annuity provides a guaranteed income stream for life, protects against the risk of outliving one’s retirement savings, and provides a tax-efficient retirement income option.
How Does Programmed Withdrawal Work In Nigeria?
In Nigeria, programmed withdrawal is the default after retirement and it allows an individual to withdraw a fixed monthly amount from their retirement savings account (RSA) balance until the programmed fund is exhausted anytime after 10 years.
Why Not Programmed Withdrawal?
A programmed withdrawal does not provide a guaranteed income stream for life and does not protect against the risk of outliving one’s retirement savings.
Which Retirement Option Is Better, Annuity Or Programmed Withdrawal?
The best retirement income option for an individual in Nigeria who prioritizes financial security and peace of mind is an Annuity
Is My Fund Safe In Annuity
Yes, your fund is 100% secure. Even if the insurance company got liquidated, your funds will be transferred to another insurance company and they will take over.
This is because your money is always with the pension funds custodian (PFC) just exactly like PFA for programmed withdrawal
Which Body Regulates Annuity And Programmed Withdrawal
Programmed withdrawal is regulated by National Pension Commission (PENCOM) While Annuity is regulated by both the National Pension Commission and National Insurance Commission (NAICOM)
What’s The Duration Of Programmed Withdrawal And Annuity Payment
Both programmed withdrawal and Annuity pay pensioners monthly but the long-term duration for programmed withdrawal is a minimum of 10 years and a maximum of 18 years.
Your Pension Fund Administrator (PFA) reserves the right t stop your payment anytime after 10 years if you remain in programmed withdrawal. Annuity on the other hand pays throughout life.
How Much Do I Need To Purchase An Annuity Plan
Other personal Annuity plans require you to pay a certain amount to start receiving some amount for life; however, the retiree Annuity does not require you to pay money from your account.
Instead, your retirement savings account balance is all that is needed for you to enjoy uninterrupted monthly payments for life.
How Long Does It Take To Switch To Annuity
Switching to Annuity is a seamless and uncomplicated process. With our expert assistance, you can rest assured that the transition will be smooth and efficient, taking only about 2 or 3 days.
Do you still have some questions about annuity and how to switch? contact us at +2348061661966 right away and we’ll be happy to help.