THE MAJOR KEY TO SUCCESSFUL RETIREMENT-ODUNZE REGINALD C

Henry Ford said “Think you can, think you can’t , either way you will be right” and according to Robert Schuller 1988 “ I can ! Said the retired postman.  He was a rural mailman for twenty years” Schuller (1988:64)

But when retired after two decades of postal service in Makanda, Illinois Wayman has acquired a small pension and $1100 savings. His travel company does nearly $7 million in sales a year with Presley Tours. How does a retired mail man become a prosperous businessman and according to Schuler, he did it by believing in himself and his abilities and by making people happy. Schuller (op cited)

But in my own opinion Wayman succeeded because he was doing what he loves most, and he has a positive mental attitude. Positive attitude in life is that all that matters and secondly doing whatever you have been assigned to do with dedication and happiness irrespective of how much you are paid. According to research it has been discovered that people who continued whatever they spend many years doing are more likely to succeed than those who change vocation, job after retirement.

On how many people fail during retirement, is a function of their ability to kick starting whatever they are used to even on a smaller scale during old age. Old age comes with it issues, problems, non  acceptance , health issues and  a disconnect with current happenings in life, there is also the generation gap, and so doing what you love most or whatever you have been doing most is the key to survival. So a retired policeman, or army officer can comfortable operate a security outfit and consultancy.

And how Wayman did arrived at that, “one day someone said to him” I would love to see the ocean. That simple wish enthusiastically  expressed to Wayman led to a tour of 546 people to Miami Beach , Wayman made $120  and had such a good time that he decided to go into business” Schuller op cited.

But from my interaction with retirees within my six years in pension industry, I want to believe that what drove Wayman was not the money but the actual sharing of one’s thought and deepest hopes fulfilled. And as Chinua Achebe will say the sharing  of one’s thought and deepest hope fulfilled can drive human beings to success. And the keen desire to return and do what he was doing before was the actual driving force for Wayman Presley.

It has been proved that people always wish for what they don’t have, I believe that Wayman was looking forward to his retirement during his working career but it did not take time for him to realize that he could have love going back to work may be after staying for the initial period of six months. That is the irony of life. The irony of life is that people tend to be what they are not, that is why you see the whites sun tanning and the blacks bleaching.

What this is indirectly saying is that within the working career ,work with zeal and dedication, know all that you need to know about the job, because you may never can tell, that you are indirectly  developing a business for yourself during old age.

In an article captioned “You may never retired” that appeared in wall street journal it states” that sum sizable number of retirees  may continue to work after retirement due to so many reasons like their pension pot  was not enough, they were ripped off  of the retirement savings and majority because they love what they do.

And according to Walter Updegrave in an article captioned “ Three Little mistakes that can sink your retirement,  which appeared in Yahoo Finance it states that “It’s almost become a cliché. Virtually every survey asking pre-retirees what they plan to do in retirement shows that the overwhelming majority plan to work. Indeed, a recent Merrill Lynch survey found that nearly three out of four people over 50 said their ideal retirement would include working. Which is fine. Staying connected to the work world in some way can not only offer financial benefits, it can also keep retirees more active and socially engaged”

But a more interesting story was the story of life of Mary Calendar, “Mary was making potato salad in an inn in Los Angeles during world war 11, her boss asked her to make pies for a large crowd. That was the start of a new career for Mary” Schuller (op cited). Continuing he stated that in 1948, she and her husband sold their car, to buy a refrigerator and an oven “in 1964 they open their first pie shop in Orange county and by 1986, they sold the family business about 115 restaurants to Ramada Inn Inc for $90 Million “What a tremendous accomplishment as that business may be hitting 2 billion Dollars in 2014.

Finally life during retirement is a great and rewarding life and what you make out of it is a function of the zeal, knowledge and experience, you acquired during your working career and when you are happy you are more likely to live long, and others will be jealous of your state and according to Dave Bernard in an article captioned “Finding Retirement state of mind”  which appeared in US News .he stated that “they appear to be genuinely happy with their state of affairs and making the most of each day. When you ask about their retirement experience they shine a genuine smile and are happy to regale you – often at length – about how wonderful it is to be in their shoes. Their happiness is infectious and you may find yourself caught up in their joy. Although it is safe to assume not everything is perfect in their world, their overall outlook is positive”. But when these are lacking, the retiree may likely not live long, thereby prompting others to fear retirement.

Consolidating on Additional Voluntary Contributions-Odunze Reginald C

The Pension Reform Act 2014 came in as an amendment to the Pension Reform Act 2004 clearly stated on the Tax on Voluntary contribution withdrawals highlighting that  “Withdrawal of voluntary contributions (VC) within 5 years from the date the contributions were made is still subject to tax. However, as clarified in section 10 subsection (4), only the income earned on the VC will be subject to tax at the point of withdrawal.
Voluntary Contribution that is withdrawn after 5 years from the date the contribution was made will still be tax free.

Those who kick against voluntary contribution , often make reference to double taxation, but that has been clarified  in section 10 subsection 4, that taxation on voluntary contribution is based only the income earned.

Odunze in an article captioned “The need for additional Voluntary Contribution” noted that “The idea of voluntary contribution will increase the pension pot and it stems from the inability of the pension pot to take care of the pension’s expectations, expenditures, medical expenses and other issues arising from the pension contributions during retirement and old age”

Continuing Odunze (op cited) stated that “Most retirees often discover that their pension Pot is not enough to carry them through and that bring us to the idea of voluntary contribution. Most retirees develop one problem or the other when they discovered that their pension pot is not enough to carry them through during old age and retirement.  But the issue of the rising cost of living and the sudden realization that the money they saved will not be able to cater for their old age” often results in sorrow mood and a bleak future.

In the article highlighted above which appeared in REGINALD ODUNZE .COM , the writer noted that “Old age is what people pray for  right from their upward age of 15 years and I wonder why people feel terrible uncomfortable on advancing old age. The result has been that bleak rather than happiness”

Similarly Odunze in article captioned “Investment the key to survival in old age, opined that “Venita Van Caspel according to schuller noted while studying investment “heard a very startling statistics of every people reaching age 65, only 2 percent were financially independent” continuing Schuller op cited opined that Venita was raised in a Christian home without money, which she claims gave a health respect for a dollar”

The need for voluntary contribution came as a result of the insufficiency of pension contribution and the inability of some private sectors to pay accrued pension rights. The need for accrued pension stems out of the desire of the Federal Government to cater for the period preceding 2004, where an employee have put in number of years to the organization. But a situation where the organization  refused to provide for such accrued right , what do the retirees do,  of course nothing , but if there is additional voluntary contribution , it can take care of any shortfall in the expectation   of the retirees pension pot.

But one of the incentives of voluntary contribution is the tax incentive as it reduces the taxable income and provides additional income during retirement.

Culled from Reginaldodunze.blogspot.com

The Mortgage Access, a case for Housing Development as the Pension Fund Assets Hits 4.6 Trillion NAIRA.

Goal 9 Of the sustainability  Development Goal  (SDG) 2015, which has come to replace the Millennium Development Goal (MDG) pointed out the need for infrastructure development.  This clearly pointed out on the need for infrastructure , of which housing is one of them.

The Pension Reform Act 2014 on Access to Mortgage observed in Section 89 subsection 2 of the Act noted that a Pension Fund Administrator (PFA) may subject to guidelines issued by the National Pension Commission, apply a percentage of the pension assets in a Retirement Savings Account (RSA) towards the payment of equity contribution for a residential mortgage by a RSA holder.

The importance of housing can be seen in its place in the 1999 constitution of the Federal Republic of Nigeria. S.16 (I) (d) provides as one of the fundamental objectives and directive principles of the Nigeria state policy, the provisions of suitable and adequate shelter for all citizens, the same was made in the 1979 constitution (Nigeria constitution 1979, 1999 and FMBN 2006)

Continuing the FMBN bulletin 2006 stated that FMBN Act 1993 and the Mortgage Institutions Act 1989 all fell short of desired impact on housing and Mortgage industry. The National Housing Policy 2002 according to FMBN is to ensure that all Nigerians own or have access to decent, safe and sanitary housing accommodation at affordable cost and secure tenures. But this is not been achieved, as NHF has been involved in the refund of contributions which cannot afford enough blocks talk less of building houses.

Therefore there is that urgent need for infrastructural development, a case of housing as most retirees are faced with the great task of building their own houses. In an article on 15 costly mistakes pensioners make, Odunze (2014) in the verynewsinfo.com highlighted that one of the pension mistakes is using retirement money to build a house after retirement. It should be noted that building houses after retirement aggravates the retiree health as the retirement money is not enough to erect a house coupled with the ignorance of the retirees who thought that they will be paid everything in the retirement savings account balance only to hear the bitter truth of the provisions of the Pension Reform Act 2004 for 25 percent, according section 4 subsection (!) paragraphs (a) (b) (c)and Section 4 subsection 2 of the PRA 2004  and section 7 subsection (1) paragraphs,(a)(b) and (C) of the PRA 2014.

 And so the need for such housing development cannot be over-emphasized as in all investments instruments, it is investment in housing that appreciates astronomically. In an article in the Telegraph Newspaper of London, Richard Dyson noted in article captioned “ £1,250bn and rising , how buyer to let is overtaking Pension”  that  “The value of property owned by Britain’s growing army of buy-to-let investors is fast approaching the value of the entire workforce’s pension savings built up over decades of employment. At £1.25 trillion – £1,250bn – the value of the flats and houses owned by almost two million small-time landlords is catching up on the £1.6 trillion total amassed in workers’ pension schemes.“

In a recent announcement in 2015 in Lagos, the nation’s commercial nerve centre; while announcing attending a pension forum organized in conjunction with stakeholders in Nigeria Labour Congress , NLC and the National Pension Commission ,PenCom, the Acting Director General of National Pension Commission, Chinelo Aholu stated that the pension assets has hit 4.6 Trillion and still counting. That provides enough investment outlay for infrastructural development in housing.

The Former Governor of the Central Bank, Mr. Sanusi had canvassed for the use of the fund for infrastructure development. In an article in Punch 2011 captioned ”Safeguarding Pension Funds”  it reported that the Central Bank Governor has canvassed for the use of the pension fund in rescuing the decayed infrastructure , however the paper was quick to add “but this should be discouraged because of the underlying factors of mismanagement” continuing it stated that as “plausible as this idea may seem to have, are problems of corruption, inflated contracts and abandoned projects which may threaten investments in such areas. The paper concluded that it is necessary to “avoid a situation where money may not be available when pensioners are ready to collect their life savings” All these stems from fear of the unknown which I don’t blame them because corruption had at one time or the other affected, the smooth running of some laudable government policies.

Be as it may , it is a good proposition but do we because of fear of corruption allow the retire to suffer in  using the pension to start building a house and the risk of inflation on the said fund, bearing in mind that the majority of the retirees still use the retiree fund to build houses. The result is more abandoned project as most retirees are in the last phases of their circle of existence and may not be able to complete such projects.

In most developed countries in Europe and America, pension fund are being used for infrastructural development especially in the area of housing. But what they do here is that they build houses for lease and rent, and some are used for outright sale. They discovered that of all investment in life, it is real estate that has the highest rate of return. As a house that was bought in 2012 for 5 million cannot be sold for the same amount even within a period of 3 months. As both land and building appreciates over a period of time.  Jerry Lewis, the owner Macdonald, once stated that he is getting his wealth through real estate and not through the restaurant.

Since the masses are afraid of corruption ravaging the fund, if it used for infrastructural development, they can work out the following:

The retirement saving balance can be used to access mortgage under strict compliance

The commission in conjunction with PFA and PFC can embark on massive housing project with part of the fund as a way of ensuring housing for all.

Let us remember and bear in mind the words of Richard Dyson that “ while traditional pension saving is complex and unpopular with many, the phenomenon of buying-to-let is now growing at its fastest rate ever, spurred by rising rents and house prices and cheap mortgages.” Will the pensioners be able to afford the rising prices of houses and rents knowing quite alright that if they know they can’t afford it at their point of retirement they make resort corruption during their working life. And that is why we give kudos to the legislators who amended the amended PRA 2004 that gave rise to PRA 2014.

Sequel to the provisions of the act, we are however awaiting the issuance of guidelines for implementation of this provision from the National Pension Commission.

REGINALD ODUNZE.COM

reginaldodunze.blogspot.com

Odunze Reginald C

Managing Partner, Chareg Consulting, Lagos.

THE FLEXIBILITY OF THE PENSION REFORM ACT -Odunze Reginald C

In Accessing contributions before age 50 ,The Pension Reform Act in section 7 (2)  allows an individual who voluntarily retires, resigns or is disengaged from employment access to 25% of his or her retirement savings account (RSA) balance if he or she is unable to secure another job within a period of 4 months. This is a great contrast from what was obtainable under the PRA 2004 where only individuals who were involuntarily disengaged from employment were entitled to access 25% benefits after remaining unemployed for 6 months as in section 4 subsection 2 of the  Pension Reform Act 2004.

The problem then tend to compound when the contributor is force to resign as in banks, and other financial institutions, and other organizations who also employ such tactics in order not damage the career of the former staff who may be asked to go due to so many reasons, too numerous to mention.

At a time waivers was given to bank’s employee who resigned based on the advice of the employers but what happens to employees of other organization who have similar problems as at that time. Most of them felt frustrated that the law was discriminatory as one law ensures fair justice who matter whose ox is being gored. For the adherent of the equity of the law noted that in law not only justice must reign that people see to it that has justice has reigned.

I am not a lawyer, so the issue of justice and its administration should not and will never our subject of discussion, but our interest is that now the Pension Reform Act 2014 by the provisions of section 7 subsection 2 has come to alleviate such problems and also reduce the gestation time of such benefit application from 6 months to 4 months.

Finally it could be seen that the amendment of the PRA 2004 that gave rise to PRA 2014 has clearly pointed out the human nature in the enactment of law but another desire of contributors from interaction with them over a period of 7 years is the desire to increase the N 550, 000, one off payment when a contributor has to his credit an amount in his or her retirement of 550,000. Contributors are looking forward to raising the bar to N1million as they argue that the fallen of standard of living and the inflationary rate which stood at 2 digit figure has necessitated their desire for such .

reginaldodunze.blogspot.com

Will inflation impact negatively on your pension pot?- Odunze Reginald C

According to investopedia, it stated that “Inflation is defined as a sustained increase in the general level of prices for goods and services. It is measured as an annual percentage increase. As inflation rises, every dollar you own buys a smaller percentage of a good or service”.  While Wikipedia noted that “In economics, inflation is a sustained increase in the general price level of goods and services in an economy over a period of time.”

And according to Wikipedia, Nigeria’s inflation rate stood at 8.3 percent as at July 2014 and as at December 2014 stood at 9.2 percent according to Trading Economics, the country of Venezuela has the highest inflationary rate of 60.9 percent as at May 2014 while Italy has the lowest inflationary rate of -0.9 percent as at July 2014 according to Wikipedia.

But according to Michelle McGagh  of citywire.com she observed that “Pension savers are still in the dark about the impact the ‘inflation switch’ brought in by the government two years ago will have, despite the possibility that it could wipe 25% off their retirement income.” They went on to say that “Research by human resources business, Aon Hewitt shows Brits do not understand what effect the switch from the retail price index (RPI) to the consumer price index (CPI) has had” .
The article went on to say that “Two years ago, the government announced plans to move the indexation of pensions from RPI to CPI. It did this because CPI rises a lot slower than RPI, as the latter includes housing costs, so it means the state pension will rise more slowly, as will public sector pensions, costing the government less money.  When it comes to private pensions, the amount they pay out could also increase more slowly as many are tied to inflation, and would have adopted CPI instead of RPI.”

Although the article based their research on the situations in Britain, but the aftermath of globalization does  indicate economy does not exist in isolation stressing that  what affects one economy will definitely affects the other. And according to Nathalie Bonney  in article captioned “How rising inflation can destroy your pension” which appeared in money observer, the article noted that “Anyone who has bought a fixed annuity [which provides a regular income for life] could see the value of their pension erode significantly over time,' says Dr Ros Altmann, director general of Saga.

She adds: 'The longer they live, the poorer these pensioners become, as the real value of their fixed pensions is reduced by inflation.'
So how does inflation affects your pension pot?  Nathalie noted that “Any cash savings are hit because the low interest returns on savings accounts cannot compete with the rate of inflation. Pension pots face a similar challenge with money losing value over long timescales”
If inflations are hitting Europeans and American who at times have negative inflationary rate what happens to Africans with one or two digits inflationary rate.
What it portends is that your pension pot may not carry you through during retirement. This is because during period of inflation, what N100, 000 can buy in previous years may not purchase up to N 75,000 during period of inflation. How then do you protect your pension pot during inflation? You may have nothing or less to do to protect your pension pot during inflationary period.  But the decision you take in either choosing programme withdrawal or annuity will offer the necessary succor.   Because those who are more likely to be hit by inflation are those on annuity as they have a regular income without investment, as the investment that comes into their pension ; go to the pool of fund and not the annuitant; although they may continue to receive pension throughout their life time, but the value over time may be eroded by inflation.
What happens then, when the situation described above hit the retirees, coupled with the delicate health nature of men and women above 65 years? Will it shorten their lifespan? Will it impact negatively on them? Definitely yes, but the survival of the individuals involved is a function of their ability to absorb situations and their mindset, for those who have positive outlook; it will definitely not affect them.


Culled from REGINALD ODUNZE.COM Reginaldodunze.blogspot.com.

PENSION POT AND ITS IMPACT ON RETIREE- Odunze Reinald C

Tom Macphail in an article captioned “10 costly Pension Mistakes” noted that “If you have a pension, have you ever reviewed it? Millions of people haven't. Moreover, recent research revealed more than two in five adults (41%) - 8 million people - cannot remember how their pensions are invested. Why is that alarming? Performance can vary quite dramatically across investments and even a seemingly small difference could have a significant impact on the size of your pot”

Continuing he stated “that these are just projections. Investments will not always go up in value, they also go down, so you could get back less than you invested; what is certain is that they won't perform as predicted. Also, these values are in today's terms, without considering inflation, which will reduce the spending power of your money over time “

Macphail concluded that “Therefore checking your pension pot is very essential in avoiding mistakes”.

And according to Walter Updegrave in an article captioned “Three Little mistakes that can sink your retirement, which appeared in Yahoo Finance it states that “It’s almost become a cliché. Virtually every survey asking pre-retirees what they plan to do in retirement shows that the overwhelming majority plan to work.

Indeed, a recent Merrill Lynch survey found that nearly three out of four people over 50 said their ideal retirement would include working. Which is fine. Staying connected to the work world in some way can not only offer financial benefits, it can also keep retirees more active and socially engaged.

How then do you increased your pension pot, experience has shown that majority do not realize the importance of the pension pot until a year to their retirement when they suddenly realized that the total savings could not carry them through. 

The best approach is to use the pension calculator, contributors should make it as a duty to check their pension pot from their Pension Fund Administrators or they make online pension calculator which has in built mechanism capable of calculating the contributor’s likely expected values and returns based on a projected contribution and an expected income.

reginaldodunze.blogspot.com