Maximizing Your Retirement Savings Through Additional Voluntary Contributions

In today’s fast-changing financial landscape, it’s more important now than ever before for every worker to plan for secure and comfortable retirement. The Contributory Pension Scheme (CPS) has played a vital role in enabling individuals to plan effectively for their post-work life. Participating in additional voluntary contributions (AVCs) is one sure way of enhancing one’s retirement savings because of its significant financial advantages.

The Additional Voluntary Contribution (AVC) is an Additional Pension Contribution deduction RSA holders can choose to add to their mandatory pension contributions and set aside as retirement savings. It enables individuals to enhance their Pension savings during their working years, helping them achieve their retirement income goals. The “VGP pension calculator” available on the company’s website can be used to make projections of amounts required to be saved to attain a targeted income during retirement.

Contributors have the flexibility to decide the amount and frequency of their contributions, with the option to start, stop, increase, or reduce the amount at their convenience through employers, in line with the Labour Act, 1990. Moreover, voluntary contributions are accessible to a wide range of workers, including retirees under the defunct defined benefit scheme (DBS) and those under the CPS who rejoin service on contract. Additionally, workers in the private sector belonging to Closed Schemes or Approved Existing Schemes (AES) can also make voluntary contributions, making it an inclusive option for all who seek to participate.

Unlike regular mandatory savings, AVCs are deducted from the contributor’s salary by the employer before tax, making it a tax-efficient way to save for retirement. AVCs also provide a higher return than conventional savings accounts, thus maximizing the growth of retirement funds.

AVC remitted into the RSA are segregated into two parts, i.e. Contingent and Fixed portions. The contingent portion, which constitutes 50 percent of the AVC, is available for withdrawal by the contributors. On the other hand, the fixed portion, also comprising 50 percent of voluntary contributions, can only be accessed by the RSA holder at retirement, which significantly boosts an employee’s pension and lump sum upon retirement.

Recently, the National Pension Commission (PenCom) reviewed the guidelines for Voluntary Contribution to reduce the retention period for accessing the 50 percent contingent portion, achieve uniform withdrawal rules, address tax deduction variations, and simplify the process for all contributors.

Consequently, mandatory (Active RSA holders) and non-mandatory (Retirees) contributors can now access the 50 percent contingent portion of their voluntary contributions after one year, a reduction from the previous two-year requirement. The reduction aims to provide speedy access to funds to meet personal needs, which often arise. In addition, retirees, exempted contributors, political office holders, employees in organizations with an AES, and foreigners are permitted to withdraw 50 percent of their voluntary contributions before the expiration of their employment or contract.

All income accrued to the AVC investment is not taxable if the withdrawal is made five years of making the contribution while the income accrued on AVC withdrawn less than 5 Years for both mandatory and non-mandatory contributors will be taxed.

Veritas Glanvills Pensions Limited (VG Pensions), a leading Pension Fund Administrator in Nigeria, is dedicated to helping individuals unlock the full potential of AVCs. With a focus on maximizing returns and ensuring the security of funds, VG Pensions has become a trusted pension fund manager for many Nigerians looking to enhance their retirement savings.

Whether you are just starting your career or nearing retirement, your AVCs under the management of VG Pensions can provide the financial boost you need to achieve your retirement goals. Take the first step today to enhance your financial security. With VG Pensions, your vision of a sustainable and prosperous retirement future is easily achievable.

For more information on how to start AVCs with Veritas Glanvills Pensions, visit our website: www.vgpensions.com or contact us directly at 02012803550 or contactcenter@vgpensions.com