Innovictor
New Member
A pension is not just some kitty pot into which you put money now with the hopes have having money to draw out when you retire from active service. A pension is basically an investment that you make now with the expectations of receiving consistent income when you are no longer working.
It might interest you to know that a pension is not stuff for old people; in fact, the earlier you start working on your pension fund, the better your chances of having a decent sum of money when you retire. Thanks to the Pension Reform Act 2014, the National Pension Commission (PenCom) is working hard to ensure that more Nigerians are able to retire with a sense of financial security.
The jury is still out on the level of control you have over how your pension is being managed, but it might interest you to know that PenCom has a list of 21 Pension Fund Administrators (PFA) who will do the actual work of managing your pensions. I strongly believe that PenCom is doing a great job of regulating the actions of these PFAs; nonetheless, this post gives insight into questions to ask before choosing a Pension Fund Administrator
Is it Cost Efficient?
Any financially savvy retiree will tell you that their calculation of what their pension's payment is supposed to be based on their contributions and duration of service and the actual payout that they now receive on retirement is quite different. The simple reason for this difference is that a number of small fees and charges could significantly reduce the total return of a pension fund over its lifetime.
Hence, if you do have a say in choosing your pension fund administrator, you should opt for a PFA with a simple organizational structure that encourages operational efficiency. It also helps if the PFA only charges for services that add value to your pensions as opposed to innumerable administrative charges.
Is it Simple and Straight Forward?
You will be surprised at how insanely simple the world of pension fund investments and the pension payments accruable to pensioners can be if you find someone who can take the time to explain to you. However, the fact remains that financial professionals tend to keep things complex even though simpler would work just fine.
If you have a say in choosing your PFA, you should opt for a firm that has a simple and straightforward process in letting you known what's up with your pension at any point in time. You need to know that if the PFA's system is too complex, it will take up a lot of time, costs will increase and mistakes tend to happen.
Is the Investment Performance Decent?
Most pensioners are content with having the assurance that they will receive an amount of money at the end of the month without having to organize rallies to protest non-payment of pensions. However, pension fund managers are not just dumping your pension contributions into a bank account; rather, they are investing the funds. Hence, if they make bad investment decisions, they could have a hard time being able to keep up with the payment of pensions.
You need to understand that your pension payments must be constant and keep up with inflation; otherwise, you'll fall back financially. Hence, you should pick a pension fund administrator that can guarantee the payment of stable returns over a long period of time irrespective of the prevailing economic conditions.
Is it Trustworthy?
Trust is an important commodity when it comes to trusting a firm with your financial security when you go into retirement. Hence, it is important that you put your financial future into the arms of a trustworthy firm.
There's no foolproof way of knowing if a PFA is trustworthy or not, but you can have idea by looking at how accountable they are to their current crop of pensioners. The recommendation or condemnations of the pensioners in their books could offer valuable insight that will help you decide if you want to trust them with your future or otherwise.
