What You Need to Know About Voluntary Contributions to Your Pension

Continuing on the educational series "Your Pension, Your Money, Your Future," Donald Onuoha, Managing Director and Chief Executive of Fidelity Pension Managers, discussed the pivotal role of voluntary contributions in enhancing pension savings. With over 18 years of experience in financial management, Mr. Onuoha provided valuable insights into the workings and benefits of the VC scheme.

Voluntary contributions offer several advantages for both employees and employers:

• Tax Efficiency: Pension contributions are tax-exempt for both employees and employers. By opting into the VC scheme, employees can lower their taxable income, ultimately reducing their tax liabilities.
• Flexibility and Growth: The VC scheme allows employees to contribute beyond the mandatory 8%, boosting their retirement savings. These additional contributions are professionally managed alongside the mandatory pension funds, benefiting from the same investment strategies and potential returns.
• Contingent Withdrawals: Active contributors can access up to 50% of their VC funds as contingent withdrawals every two years. This provides a safety net for emergencies while the remaining 50% continues to grow, enhancing financial stability upon retirement.
• Expert Management: Contributions under the VC scheme are managed by Pension Fund Administrators (PFAs), ensuring that funds are invested wisely and protected, with strategies focused on optimizing returns.

In addition to the VC scheme, the micro pension plan is available for workers in the informal sector and small businesses with fewer than three employees. This plan offers a convenient way for them to save for their future, providing access to retirement benefits that were previously unavailable to this sector.

Employees who wish to enhance their retirement savings through voluntary contributions can start by contacting their HR or finance departments to authorize additional monthly deductions. PFAs also offer transparent account management systems that allow contributors to monitor their savings and growth online.

Donald Onuoha emphasized the importance of starting early and saving consistently. He noted that even small, regular contributions can accumulate significant wealth over time, thanks to the compounding effect of interest.

He encouraged Nigerians to see the VC scheme as an essential tool in their financial planning, helping them achieve a secure and comfortable retirement.

In conclusion, voluntary contributions are a vital aspect of retirement planning, providing flexibility, growth, and security. Nigerians are encouraged to take advantage of this opportunity to ensure a financially stable future.

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