Now that you’ve got your new job, it’s the best time to start thinking about your future and taking steps to ensure that you enjoy life after work. Have you ever tried to picture yourself 30 or 40 years from now? If you haven’t yet, then you should, as your future self would be very thankful. According to some research done by Hal Hershfield, a social psychologist, you will make better decisions if you can picture or see your older self. Making wise decisions now will always pay off in the future.
Here are 3 things you should know:
1. What is a Retirement Savings Account (RSA)?
A retirement savings account is an account into which a regular amount is contributed as savings towards your retirement. You enjoy tax relief on the money you set aside, which is then pooled together with contributions from other workers and invested for optimal returns. When you retire, the value of your savings would have grown significantly, reflecting your contributions and the return on investment. When compared with a regular savings account, a retirement savings account is expected to yield significantly higher returns, on average, which are not subject to tax.
2. What are Contributions?
Contributions are the regular deposits made into your RSA, usually paid every month. There are two types of contributions made in accordance with the regulations of the National Pension Commission (PENCOM): statutory contributions and additional voluntary contributions (AVC). Statutory contributions are obligatory monthly deposits of 18%, (10% by the employer and 8% by the employee) made into your RSA by your employer. This is automatically deducted from your salary and you don’t need to worry about it.
The additional voluntary contribution (AVC) is an optional (but highly recommended) deposit which you can make into your RSA. All you need to do is inform your employer about your intention to commence AVC, and it will be deducted directly from your salary. There is no minimum amount to be contributed as AVC.
Your voluntary contributions are not subject to tax, and you can withdraw from, or liquidate, your AVC at any time. However, if the AVC is withdrawn or liquidated within 5 years after the contribution was remitted, the investment income or return earned on the AVC during the period would be subject to tax.
An additional advantage of the AVC, and a major difference from regular pension contributions, is that you are at liberty to decide the amount you wish to contribute, in addition to the frequency of the contributions; e.g. monthly, quarterly, bi-annually or annually.
3. When can I withdraw my money?
You will have access to the funds in your RSA upon retirement, but subject to attainment of minimum age of 50 years. Apart from attaining the minimum voluntary retirement age of 50 years, the other circumstance where an RSA holder can access contributions in their account, is if the account holder loses his/her job and has been out of work for at least 4 months. In this scenario, the RSA holder can apply for up to 25% of the total RSA balance.
Life after work is significantly easier when there are sufficient savings and retirement income to maintain your lifestyle.
Talk to us about your RSA, and get a personalized answer.
AXA Mansard Pensions invests RSA contributions into various return-generating instruments such as FGN and corporate bonds, treasury bills, other money market investments, and equities, based on guidelines stipulated by the regulator, the National Pension Commission (PenCom).
If you would like a more accurate idea of what you should do to be setting aside, our online calculator can help you do this. Alternatively, should you prefer to speak with a pension adviser, you may contact us using the details below:
Email – email@example.com
Phone number – (+234)01 4485490
Would you like a more accurate idea of how much you should be saving for your retirement? Use our Pension Calculator tool.