Insurance and Pension contributors earn N100.5bn as compensation

Nike Popoola


Pension Fund Administrators and insurance companies paid a total sum of N100.5bn to the dependants of deceased workers who subscribed to the Contributory Pension Scheme since the inception of the scheme in 2004 and March this year.

According to a report obtained by our correspondent from the National Pension Commission on the approval of death benefits, the sum covered both the pension and the group life insurance benefits of the deceased contributors.

“Cumulatively, a total of N100.52bn was paid as death benefits (including life insurance) of 34,410 deceased employees from both the private and public sectors as of March,” It stated.

Out of the 34,410 contributors, 26,394 were Federal Government workers, 1,846 worked for the different state governments, while the remaining 6,170 were from the private sector.

The CPS commenced in the country in 2004 backed by the Pension Reform Act, which was amended in 2014.

The law mandates employers with at least three workers to put the scheme in place to provide financial security for the employees in retirement.

According to the PRA 2014, the employer is expected contribute 10 per cent, while the worker contributes eight per cent of the total monthly emolument into the Retirement Savings Account of the employee.

In addition, the law also mandates employers to purchase group life insurance cover for the workers.

The essence of this is to enable the dependants of a deceased worker to get three times the annual total emolument of the employee.

Under the PRA 2004, the PFAs were not allowed to pay out such benefits if the deceased worker did not leave a Will behind unless the dependants could produce letters of administration of the dead worker’s estate.

This provision makes most dependants of deceased workers to forgo the benefits because they are unable to go through the stress of obtaining letters of administration as a result of the fact that their breadwinners did not leave Wills behind.

However, under the amended PRA 2014, the requirement for a Will was removed for the settlement of group life insurance claims but retained for pension benefits.

The PRA 2014 also stipulated that the PFAs should pay the pensions of the deceased contributors, while life underwriting companies should pay the insurance benefits.

The removal of the requirement for a Will has enabled a lot of deceased contributors’ dependants who were hitherto finding it difficult to get the insurance benefits to go for them.

The Director-General, Nigerian Insurers Association, Mr. Sunday Thomas, said the delays that used to characterise the transfer of the benefits from insurance firms to the PFAs when under a group life insurance arrangement and the demand for letters of administration had been removed.

“The provision of the insurance law regarding payment of claims is now being implemented, which means that the main beneficiaries will be paid directly, and that reduces the delay that occurs in claims settlement,” he said.

The only grounds on which an insurance company will now ask for the letters of administration, according to him, is if the deceased worker did not leave any beneficiary behind.

Before the enactment of the PRA 2014, the insurance claims used to be paid into the RSAs of the workers, with the PFAs enforcing the requirement for letters of administration.


Source: Punch