1. What is the Programmed Withdrawal Pension Calculation?

The programmed withdrawal pension calculation determines the monthly pension amount under Nigeria's Contributory Pension Scheme. It uses the Retirement Savings Account (RSA) balance and an annuity factor based on life expectancy to calculate sustainable monthly payments.

2. How Does the Calculator Work?

The calculator uses the programmed withdrawal formula:

Where:

• \( RSA \) — Retirement Savings Account balance (NGN)
• \( Annuity\ Factor \) — Factor based on life expectancy and interest rates (unitless)

Explanation: The annuity factor represents the present value of a stream of future pension payments, considering life expectancy and discount rates. A higher annuity factor results in lower monthly payments spread over a longer period.

3. Importance of Pension Planning

Details: Proper pension planning ensures financial security during retirement. Understanding your potential monthly pension helps in making informed decisions about retirement age, additional savings, and investment strategies under Nigeria's pension scheme.

4. Using the Calculator

Tips: Enter your RSA balance in Nigerian Naira and the appropriate annuity factor provided by your Pension Fund Administrator (PFA). Ensure both values are positive numbers for accurate calculation.

5. Frequently Asked Questions (FAQ)

Q1: What is an annuity factor?
A: The annuity factor is a numerical value based on life expectancy tables, interest rates, and other actuarial assumptions that determines how your RSA balance is converted into monthly pension payments.

Q2: How is the annuity factor determined?
A: Pension Fund Administrators (PFAs) calculate annuity factors using actuarial tables that consider your age, gender, life expectancy, and prevailing interest rates.

Q3: Can I choose between programmed withdrawal and annuity?
A: Yes, under Nigeria's pension scheme, retirees can choose between programmed withdrawal (managed by PFAs) or purchasing a life annuity from insurance companies.

Q4: What is the typical range for annuity factors?
A: Annuity factors typically range from 150 to 300, depending on age at retirement and other factors. Older retirees generally have lower annuity factors.

Q5: Are pension payments taxable in Nigeria?
A: Monthly pension payments from programmed withdrawal are subject to tax, while the lump sum payment is tax-free up to certain limits as per Nigerian tax laws.