The Pension Reform Act empowers the employee to choose his/her Pension Fund Administrator (PFA), open and maintain a Retirement Savings Account (RSA).
Monthly Contributions (which should not be less than 18% of employee’s Basic, Housing and Transportation allowances) from employees and employers are transferred into individual RSAs for effective management by the PFA. The RSA can be transferred once a year if the employee is dissatisfied with the services of the existing PFA. This is however subject to the Transfer Window Guidelines and approval by National Pension Commission - PenCom. Employees’ access to the contributions in the RSA is as prescribed under the Law. Click here for provisions of the CPS
A scheme that existed prior to the commencement of the Contributory Pension Scheme; which promises to pay out an income based on how much an employee earns at retirement.
The benefit under the scheme is defined in terms of parameters (length of service, vesting scale right etc) to be used in calculating the benefit payable at retirement. Most DBS are funded by employers. The Pension Reform Act 2014 requires that all DBS be transferred to Pension Fund Administrators.
SECTION 4(3) of the Pension Reform Act (PRA), 2014 allows active employees under the Contributory Pension Scheme (CPS) to contribute voluntarily in addition to the mandatory contributions into their respective Retirement Savings Account (RSA) in order to augment their pension at retirement.
Similarly, section 4 (7) allows employees exempted from CPS to participate voluntarily in the CPS, subject to PENCOM’s Guideline.
Effective from December 01, 2017 the following rules and activities must be adopted:
This is a lump sum retirement benefit provided by the employer to reward qualified employees for their meritorious service.
Though, not a compulsory scheme under the Pension Reform Act 2014, employer is not prevented from establishing a Gratuity Scheme in addition to the mandatory Contributory Pension Scheme (CPS) or DBS as the case may be. At NLPC PFA, we assist organizations, desirous of operating gratuity schemes to ensure smooth and effective administration of the scheme for mutual benefit of workers and employers.