The National Pension Commission said that it had reviewed the provision for voluntary contribution under the Contributory Pension Scheme to address some concerns which include combating money laundering.
According to the Circular on Voluntary Contributions, which was released by the commission and obtained by our correspondent, PenCom issued a circular on withdrawals from voluntary contributions after it observed high incidence of withdrawals.
Additional voluntary contributions are savings made over the statutory minimum of 18 per cent that is mandated by PenCom.
It stated, “The circular was necessitated by the observed the high rate of withdrawals from the VCs by pension contributors, which appeared to negate the main purpose of augmenting pensions at retirement. In addition, the commission was also concerned about ensuring strict adherence to anti-money laundering provisions and payment of relevant taxes.”
Due to this action, the commission said it was providing further support to the current administration’s main thrust of enhancing transparency in all facets of economic activities.
It added that the main thrust of the circular was that voluntary contributions could only be withdrawn once in every two years, while subsequent withdrawals would be on incremental contributions from the last withdrawal.
“Furthermore, 50 per cent of the VC shall be domiciled as contingent, available for withdrawal within the stipulated timeframe,” it stated.
According to the commission’s guidelines, workers will only be able to make withdrawals from the VC account once in two years from the last approved withdrawal date.
It indicated that subsequent withdrawals would be on incremental contributions from the date of last withdrawal.
According to the provisions, 50 per cent of the VC contributions made by mandatory Retirement Savings Account contributors will be available for withdrawal once in two years and taxes for this category of the VC withdrawals will be paid only on income earned.
It noted that the balance of the 50 per cent would be used to enhance benefits at retirement.
PenCom also directed that foreign and exempted contributors should be allowed to make full withdrawals once every two years subject to deduction of taxes on amounts remitted and income earned.
However, contributions of five years and above made by foreign and exempted contributors would not be taxed, it added.