Derick and Raymond have been best of friends from their university days as they shared similar vision and life aspirations. This bond is evident in their career aspiration as they both gained employment in the same organization. Tenacious in realizing their ambitions, they pursued their career goals with every sense of commitment and were consequently rewarded with accelerated promotions and attractive salary packages.
Derick was advised of voluntary contributions by his Pension Fund Administrator (PFA) as an additional means of investment towards retirement. He was fascinated by the attractive benefits of having voluntary contributions asides from his statutory monthly contributions, being remitted into his Retirement Savings Account (RSA) by his employer. Basking in excitement, he decided to share the information with his bosom friend Raymond who immediately committed to the idea without further enquiry with the PFA having heard of the contingent 50% withdrawal of each lodgment retained in the RSA for a minimum of two years.
Derick unlike Raymond sought for details to understand voluntary contributions better, as an investment opportunity. The PFA official exposed Derick to the voluntary contributions tax benefit, emphasizing that as an active contributor, tax would be applied on the income earned when withdrawal is less than five years from the date the voluntary contributions was remitted into the RSA. However, voluntary contributions clocking five years and above in the RSA would be exempted from tax deductions. The possibility of tax exemptions, the option of using voluntary contribution to augment pension at retirement and other gainful benefits of voluntary contribution aided Derick in making an informed decision to sign up.
Four years down the line, Raymond was eager to withdraw from his voluntary contributions as he had dreamt of owning another luxury car and the contingency portion of his voluntary contributions would afford him enough funds to translate his dream to reality. He approached his PFA requesting to withdraw and was presented with the voluntary contribution consent form that highlighted the value eligible for withdrawal. Raymond having sighted the huge sum eligible for withdrawal, signed the consent form and applied without raising any concerns despite the PFA official’s attempt to educate him on the imminent tax benefit he would enjoy if he retains the voluntary contributions for a minimum period of five-year remittance.
Moments after the purchase of Raymond’s dream car, he embarked on a cruise with his bosom friend Derick. While on the cruise, he briefed Derick on the withdrawal of his voluntary contributions and how he expended it towards the purchase of his new car. Thereafter, Derick updated him of his plan to retain his voluntary contribution for a longer period in order to enjoy the full benefit of retaining his voluntary contribution beyond five years and possibly till retirement.
At this point, Raymond resigned to his thoughts thinking of the further benefits of voluntary contributions.
Key Highlights:
- Voluntary Contributions equal or more than five years are exempted from tax.
- Voluntary Contributions can serve as a viable investment option
- Due consultation with your PFA would aid informed decision regarding your RSA
- Embrace the voluntary contribution self-service portal for a seamless service delivery
To learn more about Additional Voluntary Contribution, visit this page.
