Various Modes of Exiting Pension Schemes


WHEN a person gets employed in an institution, it is expected that he/ she will one day separate from the employer. While the ideal situation is to reach retirement age, there are some factors that make employees leave employment earlier.

This article focuses on various modes of exit of scheme membership and the necessary procedures to be followed in order to access the benefits in an occupational pension scheme.

Most employees are part of what is called occupational pension schemes; a private scheme established by employers to cater for “a top-up” pension for their employees.

This is in addition to the mandatory national pension scheme, which is administered by the National Pension Scheme Authority (NAPSA).  

The pension scheme member and the employer make monthly contributions in line with the objective of saving for retirement.

However, there are times when a pension scheme member will exit the scheme before attaining the retirement age.  An exit from an occupational pension scheme is typically defined as the withdrawal of member benefits from the pension scheme following a cessation of contribution remittance for one reason or another.

A member can exit from an occupational pension scheme due to various reasons, which can include death, dismissal/ termination/ resignation, medical discharge and retirement.

Death – If a member dies while still in service and actively contributing towards a pension scheme, nominated beneficiaries will be entitled to the total accumulated benefits, i.e. the deceased member’s contributions, employers’ contributions plus the interest earned on the respective remitted contributions.  Beneficiaries are stipulated in a typical Nomination Form that enables pension scheme members to nominate their desired beneficiaries, including the prescribed benefit percentages to be received by each beneficiary.

Dismissal/ termination/ resignation – When a pension scheme member is dismissed, has their contract terminated or opts to resign from their current work, the member has the following options:

a)     Withdrawing the total accrued benefits (employee contributions, employers’ contributions plus the respective interest earned from the contributions).

b)    Transferring the total accrued benefits to another registered pension scheme (if the new employer has a pension scheme) where he/she can actively continue to make contributions.

c)     Leave the total accrued benefits in the pension scheme for withdrawal at retirement.  The member would then be referred to as a deferred member.

Medical discharge – In the event that a pension scheme member is declared medically unfit to work following either an illness or accident, the member will be entitled to all the accrued benefits. 

The member will have to submit a medical certificate, endorsed by a registered medical professional, stipulating the medical status and level of fitness. 

The pension scheme board of trustees would then review the application for medical charge and grant a discharge if everything is in order.  Once that is done, the pension scheme or fund administrator will be required to pay the respective total accrued benefits upon receipt of a fully signed claim form.

Retirement – When a pension scheme member attains retirement age, he/ she is eligible to withdraw his total accrued benefits.  The types of retirement are:

Early retirement – Pension scheme members who apply to leave employment five years before retirement age and meet all the prescribed requirements.  The total accrued benefits will be calculated as indicated under normal retirement (below).

Late retirement – A pension scheme member who meets all the prescribed requirements to retire five years later than the retirement age.  The total accrued benefits will be calculated as indicated under normal retirement.

Normal retirement Upon attaining retirement age, a pension scheme member’s total accrued benefits will be calculated according to the type of scheme he/she was a member of:

a)     Defined benefit scheme – Under this type of scheme, total accrued benefits are pre-determined using a formula that takes into account the member’s length of service, his final salary and a certain commutation factor determined by an expert called an actuary.

b)    Defined contribution scheme – Under this type of scheme, a pension scheme member will be entitled to the total accrued benefits from time of joining the scheme to the last month when contributions were remitted into the scheme.  The member will further be required to purchase an annuity or pension with a registered annuity provider if the accumulated benefit is above a prescribed statutory minimum under the Income Tax Act under the Fourth Schedule.

In order for any member or beneficiary to be paid out of a pension scheme, the following minimum steps will have to be followed:

a)     Request for a member statement to ascertain value of total accrued benefits.

b)     Use statement to ensure that contributions were correctly and fully remitted by both employer and member as per pension scheme rules, a set of regulations of the scheme.  A calculation of accrued benefits will be done, including any tax implications, if any.  Currently, all pension benefits (whether withdrawn before or at retirement) are exempt from any tax.

c)      Complete a claim form with the assistance of the Pension Scheme or Fund Administrator.  The human resources or finance manager, or any other designated individual, will endorse the claim form once signed by a member or appointed administrator; an individual appointed by the courts of law who can complete his Claim Form and then ensure that the beneficiaries receive the benefits.

d)     Use claim form to indicate correct bank details.

In conclusion, it is important for members of pension schemes to acquaint themselves with scheme rules to avoid disputes and delays in benefit payouts at the point of separation.

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You can also call us on 211-251 401/5 or 0977-335809 or 0965-255136.

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Pensions-related complaints: Mobile: 0950 136662, Email: pensions@

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The author is an Inspector – Market Development in the Pensions Department at the Pensions and Insurance Authority.