Life insurance companies operating in the country have been called upon to market life annuity vigorously in line with Section 4(1) (b) of the Pension Reform Act 2004 now that the regulation on the business has been released to underwriters.

Section 4 (1) (b) of the Pension Act provides that a holder of a retirement savings account upon retirement or attaining the age of 50 years, whichever is later, shall utilise the balance standing to the credit of his retirement savings account for certain benefits, including an annuity for life purchased from a life insurance company licensed by the National Insurance Commission with monthly or quarterly payments.

Director General, Nigerian Insurers Association (NIA), Ezekiel Chiejina, made the call in Lagos, stated that now that the National Pension Commission has given approval to insurance companies to market life annuity, the Nigerian Insurers Association has asked its member companies to take advantage of this development.

The National Pension Commission (PenCom) and National Insurance Commission (NAICOM) jointly issued the guidelines regulating life annuity recently. The guidelines were rolled out after majority of retirees were said to be opting for programmed withdrawal instead of annuity.

PenCom had informed that 7,181 retirees are currently receiving retirement benefits by programmed withdrawal. Of this, 1,469 are from the private sector, while 5,712 are from the public sector. These retirees account for a total average monthly withdrawal of N210 million and a cumulative withdrawal of N18.6 billion.

The figure released by PenCom has also confirmed the fears being expressed by the NIA. The Director General of NIA had lamented that majority of the first set of retirees under the new pension dispensation in the country were opting for programmed withdrawal instead of life annuity from insurance companies.

He said it was explained that retirees were shunning annuity option because insurance companies have not been proactive by designing annuity products in line with the provisions of the Pension Act.

In the report of NIA's Governing Council to members of the association, Chiejina stated that indication from the National Pension Commission is that insurers have not sufficiently demonstrated readiness to provide annuity products.

Having realised the inadequacy on the part of the insurance operators, the NIA informed that the attention of life insurers has been drawn to the issue so that they can address the challenge and take advantage of the business opportunity.

Nonetheless, NIA, the umbrella body of all insurance companies operating in the country, at another forum, affirmed that annuities are far better than programmed withdrawal if the benefits of annuities to retirees are anything to go by.

NIA's Chairman, Mr. Wole Oshin, stated that annuities provide far greater guarantee, security and comfort than programmed withdrawal.

Oshin said, "But you may ask, what happens to programmed withdrawal, an alternative provided under the Pension Reform Act 2004? For the avoidance of doubt, annuities provide far greater guarantee, security and comfort than programmed withdrawal, which is time bound."

In a related development, Group Managing Director, Crusader Insurance Group, Tola Mobolurin, raised alarm that programmed withdrawal could create old beggars in case retirees, who choose it live beyond their anticipated life expectancy.

He, however, pointed out that the people should have the option of choosing, saying "For those that the programmed withdrawal suits their purpose, they should choose programmed withdrawal. For those who think annuity will better meet their needs, they should also be allowed to choose the annuity plans that are available."