Use voluntary pension contributions as business capital

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Initial capital is essential to start the business of your dreams. This is a major challenge for budding entrepreneurs. However, the 2014 Pension Reform Act (PRA) allows a worker in the public or private sector to periodically contribute a certain amount of their salary to a voluntary contribution scheme (VC).

This platform is outside of regulated monthly pension contributions, although it is an additional savings that will be posted to your Retirement Savings Account (RSA). This form of contribution aims to help you financially in case of need. 50 percent of the savings could be withdrawn every two years and yet could be used to start a business or invest it in existing businesses.

What is VC?

Voluntary contributions are additional funds that you can choose to add to your mandatory retirement contributions, or just set them aside as retirement savings. These funds would be taken from your monthly fee by your employer and paid into your Retirement Savings Account (RSA), at the same time as your regular pension contributions. CR is different from other regular savings you might have because it is deducted from your pre-tax salary.

VC subscription

Any employee covered by the contributory pension scheme (CPS) has the right to make voluntary contributions. All you have to do is notify the relevant department in your organization (for example, human resources or finance) that you wish to make voluntary contributions, specifying the amount and frequency.

If you decide to opt out of your VC, all you need to do is complete and submit your Pension Fund Administrator Benefit Withdrawal Form (PFA), attaching a photo ID and request letter. funds.

Your request will be processed in accordance with the guidelines of the National Pensions Commission (PenCom) and benefits paid within 3 weeks.

Benefits of voluntary contribution

Voluntary contributions can be invested in your dream or in existing businesses. Therefore, you can tie the savings to an investment project and if you are lucky enough to have a paid job before age 30, it is an advantage for you to accumulate more savings when you retire. . The main difference between this and regular pension contributions is that you are free to decide how much you want to contribute, in addition to the frequency of contributions; for example monthly, quarterly, semi-annually or annually.

You can also withdraw or liquidate 50% of your VCs credited to your RSA for at least 2 years, or once every two years, from your last approved withdrawal date. The venture capital system is fully supported by the PRA 2014; therefore, you can rest assured that your voluntary contributions are safe and in good hands.

The President of the Pension Funds Operators Association of Nigeria (PenOp), Mr. Wale Odutola said: “You have the right to withdraw up to 50% of your additional voluntary contributions once every two years. When you need money, you can use your voluntary contributions.

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