Employee's Insurance Rights (1)

Dear esteemed readers,

I am sure that most of us are already aware of certain rights we have as an employee as far as insurance is concerned, still I believe that there is a need to remind ourselves constantly of our insurance entitlements. Who knows? Someone somewhere may be reading about these rights for this first time.

If you are a public servant or an employee of a private company with five or more staff strength, you are entitled to three different personnel insurances:

1) Contributory Pension Scheme

2) Life Insurance

3) Employees Compensation

Let's start with the contributory pension scheme. The Pension Reform Act, 2004 makes it compulsory for all employers in the categories I mentioned earlier to establish a contributory pension scheme for all their employees - permanent or not. Under this scheme which must be managed by a licensed Pension Fund Administrator (PFA), an employee has to open a Retirement Savings Account (RSA) with a PFA of his/her choice and the employer must ensure that a minimum of 15% of the employee's monthly total emolument (basic salary + housing allowance + transport allowance and where there is no breakdown, 15% of 50% of employee's total monthly salary) is paid into his/her (employee's) RSA on a monthly basis. Employer and employees are to contribute this 15% on a 50/50 basis (i.e. 7.5% by the employer and 7.5% by the employee) monthly. Aside this compulsory 15%, an employee may make an additional voluntary contribution of any amount.

The advantages of this scheme aside the traditional purpose of ensuring that employees have something substantial to fall back on at retirement are:

a) employees are at liberty to determine their own fate by choosing the PFA of their choice except for employees who work in big corporations that operate a Closed Pension Fund Administrator;

b) there is seperation between management and custodian of pension funds. The PFAs only manage the funds but the funds are kept by Pension Fund Custodians. 

c) employers have no access and no right to the employees' funds. Only the employee (the RSA holder) and his/her next-of-kin can access the funds. However, in order for the scheme to fulfill its purpose, employees can only access their funds at retirement and part of the funds when they are unemployed for up to six months.

Therefore, as an employee, all you need do is open a Retirement Savings Account with any PFA of your choice. You will be given a unique Personal Identification Number issued by National Pensions Commission (PENCOM). Kindly note that you do not need to change PFA if you change jobs. Your PFA follows you wherever you work.

For contributors to the old Nigeria Social Insurance Trust Fund (NSITF), you can apply for your fund to be trasfered to your chosen PFA. Your PFA will be more than ready to help you sort this out.

There is one thing you should keep in mind though, when opening your RSA please remember to name your beneficiary(ies) in case the 'unwanted' happens.