Pension savings provide a foundation for financial stability during retirement, helping you live a comfortable life when you can no longer work so much. However, what you receive from your pension fund administrator depends largely on how much you’ve been able to contribute during your active working years. Your contributions also determine whether you'll receive high returns from your investment upon retirement.
Based on the 2014 Pencom Reform Act, the minimum mandatory contribution of an RSA holder is 18% of their monthly emoluments. This mandate may have prompted RSA holders like yourself to closely scrutinize your contribution, worrying about its adequacy to sustain you in retirement. If you’ve ever wondered how to boost your pension savings, the tips here are just what you need.
How to Boost Your Pension Savings With 5 Easy Steps
Begin Early and Remain Persistent
One of the most effective ways to boost pension savings is to start saving early and contributing consistently. No matter how small your deposits may appear to be, they can grow substantially when you continue over a long period. Putting off retirement savings for later only means you have a shorter time to save enough money for retirement. This is especially true because the retirement age in Nigeria is pegged at 65 years.
Take Advantage of Employer Contributions
The Pencom Reform Act of 2014 explicitly states how the 18% employee contribution should be collected—a 10% minimum remittance from employers and an 8% contribution from employees.
This seemingly free cash is a part of your employee benefits package that can significantly boost your pension savings. To ensure compliance, PENCOM further encourages employees to report defaulting employees who do not pay their expected contributions. Failing to leverage this opportunity means leaving money on the table that could have been added to your retirement savings.
Extra Income Sources
Instead of relying on one source of income, consider diversifying your income streams. Having more than one income source helps you increase your contributions and can also amount to enjoying multiple employee pension benefits. To diversify your income, you may explore remote jobs, side gigs, or entrepreneurship as you deem ideal.
Lump Sum Payments
As you learn how to boost your pension savings, never underestimate the impact of lump-sum payments. By lump payments, we mean making huge chunk deposits into your RSA when you have the extra cash. Bear in mind that lump sum payments are not fixed monthly deposits, but are more like one-off payments. Perhaps when you sell a property or receive monetary gifts and bonuses, you can allocate a significant portion of the cash inflow to your pension pot.
Increase Contributions through Additional Voluntary Contributions (AVCs)
Consider increasing your pension contributions as your income grows and your financial status changes. Aim to gradually increase your contributions with each salary raise or promotion you receive. You can do this by negotiating with your employer to increase the percentage deductions from your salary to conform to the Pencom Regulations regarding Additional Voluntary Contributions (AVCs).
AVCs are simply extra funds that you decide to save in your pension pot. These funds can contribute tremendously to boosting your savings.
Read more about AVCs: https://www.blog.oakpensions.com/post/why-you-should-use-avcs-to-save-for-a-comfortable-retirement
Working Beyond Retirement Age
To increase your pension savings, you might want to consider working past retirement age when you reach that benchmark. Working past retirement allows you to continue contributing to your pension fund while delaying the need to start withdrawing from it, potentially increasing your retirement savings.
However, this decision can be relative, depending on the policies of the organization that you work for and your ability to continue working. While working longer isn't for everyone, it can be highly effective in helping you boost your pension savings. Be that as it may, the ideal retirement period for employees in Nigeria is between the ages of 60 and 65.
Conclusion
Knowing how to boost your pension savings can be life-changing for your older years, especially if you are closer to retirement. If you feel like you are not saving nearly enough to sustain you throughout retirement, consider extra income sources, increasing your contributions through AVCs, making lump payments, and perhaps working past retirement age when the time comes.
Oak Pensions offers expert guidance and reliable pension solutions to help you build a robust retirement fund. With Oak Pensions, you can navigate the complexities of pension management with confidence, ensuring a comfortable and secure retirement.
Send us an email at info@oakpensions.com or call the marketing manager at 09087448661 to learn more about how we can help you secure your retirement.
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