What is retirement insurance?
Retirement insurance is a form of social insurance payments made by your chosen insurance company or your employer. The payments will start from your chosen retirement age and also depends on the country you reside in, whichever comes first. There is also an employee retirement scheme which is to make funds available to employees who have served an organisation for a long time and is finally ready to retire.
Retirement and Pension has become a topical issue, one that has engaged the commitment of employers and workers not only in Nigeria but also in many developing and emerging economies of Africa, Asia and Latin America. Retirement pensions are typically the largest component of the set of public interventions that make up a social insurance system.
There are a few different types of employee retirement insurance:
- Defined Contribution Scheme - Contribution into the scheme is defined from the onset and it is usually shared between the employer and the employees (contributory).
- Defined Benefit Scheme - the benefit promised is under the scheme that will determine the rate of contribution. This is currently the type of scheme in the Nigerian Civil Service.
- Gratuity Scheme - This is a non-contributory scheme i.e. total payment into the scheme is borne wholly by the employer. Although gratuity payable to employee can be paid as at when liability arises by the employer. Sound system of accounting practice envisages providing for liability every year and claiming tax benefit.
Your chosen retirement insurance company will offer different types of annuity with your retirement plan:
- Annuity and Whole Life - provides payment of a sum assured on the demise of the Annuitant.
- Guaranteed Annuity - provides income for the annuitant throughout life with a 5- or 10-year guaranteed payment period.
- Annuity and Spouses Annuity - provides payment of annuity to a surviving spouse upon the demise of the primary Annuitant.