Tag: Contributory Pension Scheme

• Pension coverage remains low amid Nigeria’s expanding workforce

Nigeria’s Contributory Pension Scheme (CPS) has recorded a total of 10,928,039 Retirement Savings Account (RSA) holders in September 2025, rising from 10,882,661 in August.

This was shown in the latest summary report from the National Pension Commission (PenCom) and obtained by The Nation.

The figure marks a steady increase in pension enrolment, further establishing the CPS as Nigeria’s most reliable long-term savings and retirement plan.

Despite the growth, penetration remains significantly low, especially when compared to Nigeria’s estimated 70 million-strong workforce.

This means less than 16 per cent of Nigerian workers are currently covered under the formal pension system.

Experts said this figure reflects the challenges in onboarding the informal sector and enforcing compliance among small and medium enterprises (SMEs).

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“We’ve made some progress, but clearly, a large portion of the labour force remains outside the pension net,”said.

A Lagos-based pension analyst, Mr. Ladi Balogun said the Micro Pension Plan needs stronger incentives and more grassroots engagement to drive inclusion.

The Micro Pension Scheme, introduced in 2019 to include artisans, traders, and other informal workers, has yet to achieve the scale necessary to significantly move the needle, he stated.

Another CEO of TrustPension Ltd, Aisha Sule said they must go beyond awareness and adopt mobile and tech-driven platforms to reach Nigeria’s informal sector, where the real numbers lie.

She noted that digital integration, ease of contribution, and trust will be key.

The Director-general, PenCom, Mrs. Omolola Oloworaran has also reiterated its commitment to strengthening enforcement and encouraging voluntary contributions to boost overall pension assets and retirement income security.

Speaking on improving contributor numbers and broadening worker coverage under the Scheme, she emphasised that the CPS must evolve beyond a narrowly formal‑sector focus

“The success of this national reform rests on its implementation in every state, local government, and across the informal sector.

“We will continue to enforce employer compliance. Every naira deducted must be remitted. Every contribution must be properly accounted for. Every worker must be assured their future is secure.

“Our strategic inclusion through the Personal Pension Plan and informal‑sector access will continue. It is part of our expansion initiatives targeting self‑employed and informal workers, and nationwide sensitisation programmes across all six geopolitical zones”, she posited. 

Pension schemes are a cornerstone of financial security for millions of Nigerian workers, offering reassurance for a comfortable retirement after years of service.

But what happens when a pension contributor dies before or after retirement? For many families, the uncertainty surrounding the fate of pension benefits can be both distressing and confusing.

The chief executive officer (CEO) of Pension Fund Operators Association of Nigeria (PenOp), Oguche Agudah in a statement made available to journalists explained the laws, procedures, and common practices regarding the payment and administration of pension benefits upon the death of a contributor under the Nigerian pension system.

He reiterated that Nigeria operates the Contributory Pension Scheme (CPS), introduced by the Pension Reform Act (PRA) of 2004 and further amended in 2014.

According to him, the scheme is mandatory for employees in the public service and private organizations with at least three staff members.

Under the CPS, both employer and employee contribute to a Retirement Savings Account (RSA) managed by Pension Fund Administrators (PFAs), regulated by the National Pension Commission (PenCom), he noted.

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What Happens When a Contributor Dies?

Oguche said: “The unfortunate event of a contributor’s death does not mean the end of their hard-earned pension savings.

It is also important to clarify that beneficiaries are legally entitled to receive pension benefits and differ from the Next of Kin(s) indicated on the RSA details of the deceased. While the Next of Kin serves as a point of contact or representative for administrative purposes, only designated beneficiaries as stipulated by official nomination forms or by law are eligible to claim and receive funds from the RSA. Families should not assume that the Next Kin automatically inherits pension benefits, underscoring the need to carefully complete beneficiary nominations and keep them current. The fate of the pension benefit depends on the timing of the contributor’s death whether it occurs before or after retirement and the status of their RSA”.

Death before Retirement

He pointed out that if a contributor dies before retiring or before accessing their RSA, the total amount in the contributor’s RSA, including accrued investment incomes, becomes available to their legal beneficiaries. The PRA 2014 and PenCom guidelines govern the process for the identification of beneficiaries and disbursement of benefits.

Nomination of Beneficiaries

“Upon opening an RSA, contributors are required to nominate next of kin and beneficiaries, usually through forms provided by the PFA. This nomination is critical because it determines who will be eligible to claim the benefits in the event of the contributor’s death”.

Application and Documentation

“Upon the contributor’s death, the nominated beneficiaries or next of kin must formally apply to the deceased’s PFA for the release of the pension funds. The required documents typically include Death certificate of the contributor; Letter of Administration if there is no valid Will; Valid means of identification for the beneficiaries; Bank account details for payment; Birth certificate of the deceased in some cases; and Proof of relationship to the deceased (such as a marriage certificate or affidavit.

“The PFA then verifies the documents and initiates the process of transferring the funds to the legitimate beneficiaries”.

Dispute Resolution

Oguche added that disputes can arise, especially where multiple claimants present themselves or where the deceased did not clearly nominate beneficiaries. In such cases, the PFA may require a Letter of Administration from a probate court, which officially recognizes the legal beneficiaries of the estate.

Death after Retirement While Receiving Pension

If a contributor dies after retirement while already receiving pension payments, the treatment of their pension benefits depends largely on the mode of benefit payment that was chosen at retirement.

Programmed Withdrawal

“Many retirees opt for “programmed withdrawal,” where pension payments are made monthly until the RSA is depleted or until the retiree passes away. If the retiree dies before exhausting the RSA, the balance is paid to the beneficiaries”.

Annuity

“Alternatively, a retiree may choose a “retirement annuity,” whereby an insurance company pays them a guaranteed income for life. If the retiree chose an annuity with a guaranteed period, and they die within that period, the benefits may also pass to beneficiaries or the estate for the remainder of the guaranteed term.

Estate Laws and Probate Process

“Where there is no clear nomination of beneficiaries or disputes arise, the payment of pension benefits may be subject to the general laws on inheritance and probate in Nigeria. The Letter of Administration or Will becomes critical here, as PFAs will only release funds to beneficiaries recognized by law.

Taxation and Deductions

Pension benefits are generally tax-exempt in Nigeria; thus, the funds transferred to beneficiaries are not subject to income tax. However, any debts or loans owed by the deceased contributor to their employer may be deducted from the RSA before disbursement to the beneficiaries.

Role of Pension Fund Administrators (PFAs) and PenCom

“Pension Fund Administrators (PFAs) play a central role in managing Retirement Savings Account (RSAs) and ensuring that contributors’ wishes regarding their pension benefits are followed after death. PenCom provides regulatory oversight, issues guidelines, and can be petitioned in cases of disputes or delays.

Common Challenges and Practical Steps for Families

“Families often face hurdles in accessing pension benefits, ranging from bureaucratic delays to legal disputes among potential beneficiaries. To minimize challenges, contributors are encouraged to ensure their beneficiary nominations are up to date and accurately reflect their wishes; Inform their family members of their chosen PFA and pension arrangements; and Keep relevant documents (e.g., RSA statements, beneficiary forms) in an accessible place.

“Beneficiaries should be prepared with all required documents and promptly engage with the deceased’s PFA to avoid unnecessary delays. The death of a pension contributor can be an emotionally and financially trying time for families. However, Nigeria’s pension regulations are structured to ensure that contributors’ savings are not lost but are transferred to their loved ones according to the law. Staying informed and following the correct procedures are the keys to smooth and timely access to these benefits”, Oguche added.

No fewer than 27,701 Retirement Savings Account (RSA) holders dumped their Pension Fund Administrators (PFAs) in Quarter 1.

RSAs under the Contributory Pension Scheme (CPS) have been changing their PFAs since the introduction of the transfer window in 2021 over poor customer service and return on investment.

The National Pension Commission in a report said an RSA holder is allowed to transfer his or her RSA once yearly. The RSA transfer enables greater flexibility for contributors.

According to the commission, the RSA holders transferred a total of N191.12 billion as of March 31.

The report read: “This represents a 4,475 or 19.27per cent increase in RSA transfers when compared to the 23,226 RSA holders that transferred N141.87billion in Q4, 2024.

“Overall, a total of 368,911 RSA holders have transferred N1.77 trillion from one PFA to another from the commencement of the RSA transfer process in 2021 to Q1:2025.’’

In another development, the commission reported retirement benefits pay-out made to contributors at retirement through Programmed Withdrawal (PW) and Retiree Life Annuity (RLA), En-bloc and Lump Sum.

Total lump sum disbursed from the inception of the CPS to Q1 2025 amounted to N1.64 trillion, comprising N1.25 trillion for PW and N390 billion for RLA.

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On En-Bloc, a total of N72.41 billion was disbursed as en-bloc payments from the inception of the CPS to Q1 2025.

PW is a mode of payment offered by the PFAs that allow a retiree to access his or her retirement benefit on a monthly or quarterly basis while RLA refers to a series of monthly or quarterly pension payments purchased from an eligible Life Assurance Company.

En-bloc on the other hand is a lump-sum payment to retirees whose Consolidated RSA Balances are insufficient to secure a monthly or quarterly pension or annuity equivalent to at least one-third of the prevailing minimum wage while Lump Sum is the 25 to 50 per cent of total amount in the account of an RSA paid upon retirement.

The Contributory Pension Scheme (CPS) under the watch of the National Pension Commission (PenCom) is fast becoming unattractive no thanks to the delayed pension from accrued rights and other challenges encountered by workers and retirees under the scheme.

Other factors affecting the CPS are low returns on investment, which has barely covered a high inflation rate, refusal by PFAs to transfer retirees from Programme Withdrawal to Life Annuity, refusal to transfer workers from one PFA to a preferred PFA, confusion and lack of awareness among contributors, retirees and the general public, among others.

Thousands of retirees are yet to receive their benefits about four years after retirement.

The scheme is no longer operated as a ‘pay as you retire’, a part that necessitated pension reform in the country in 2004.

Some of the workers and retirees who have one problem or the other cried out to the newspaper for help.

Mr. Elijah, a retiree of the Yaba College of Technology, said he quit work since October 2023.

He called on the National Pension Commission (PenCom) to ensure the payment of his pension, stating that many of his colleagues were also yet to be paid.

For Mr. Legborsi, husband to the late Janeth, who until her death on January 5, 2022, was a staff member of University of Port Harcourt Teaching Hospital, Rivers State, life has been tough since her death.

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He said: “As her husband and next-of-kin, I reported the matter to the relevant authorities and  required documents by her PFA, Sigma-Access now Access ARM were submitted.

“Unfortunately, nothing has been paid from then till date from her PFA. On several occasions, I am told that my files are with PenCom. While moving about crying and complaining, someone gave me The Nation’s contact and that is why I have come to ask for help.

“Within this period my mother-in- law also died. Our children also needed the money. The payment of her rights and contribution would be ready in 18 months, according to their policy, but it’s more than 18 months and they were yet to pay. We are using this opportunity to appeal that you use your good offices to help us so we can move on with our lives.’’

Another retiree, Mr. Mukaila, who is on Programme Withdrawal, requested that his PFA transferred his to an insurance company  to enable him purchase Life Annuity but the PFA has not done so.

“I retired from Nigerian Correctional Service, on July 1, 2021. My PFA is First Guarantee now Access Pensions. I was paid my lump sum after about a year and some months after my retirement. It was after that I started receiving my monthly pension on Programme Withdrawal.

“However, I discovered that the money is too small for me to survive going by the economic realities and I decided to move my balance of money at Access Pensions to Leadway Assurance Company on Annuity. I discussed with the Access bank official who told me that a month’s salary would be deducted from my balance after which the balance would be sent to my Leadway Assurance through PenCom.

“The processing took off on January 6, 2025. Our pay day is every 15th of the month. As such I ought to be paid on the 15th of January 2025 but I was not paid. Consequently, I called in February to ask when I would be paid. I was told I have to count 20 working days as from the 6th of January 2025. That was the day I submitted my application. The 20 working days have lapsed since January 31, 2025. Payday for February is approaching and I am afraid I won’t be paid again.

“If I am not paid by this date, it would have been two consecutive months that I am not paid. Things are getting tougher for me. The people and financial institutions I owe have started troubling me every day. I am equally hungry. Please help me,” he appealed.

On the part of Mrs. Oruh, she is yet to receive pension benefits after retiring in 2020.

“I worked with NIPOST for 16 years before I transferred to Bayelsa State Civil Service in 2006 and retired in 2020. I have done everything about clearance with my documents at the Premium Pension office in Bayelsa State and finally did my capture on October 6, 2023. Yet, I have not been paid,” she added.

The Contributory Pension Scheme (CPS) continues to demonstrate impressive growth, with pension fund assets soaring by N2.13 trillion during the first half of the year, The Nation has learnt.

This substantial increase as shown in a report obtained from the National Pension Commission (PenCom) raises the total Pension Fund Assets from N18.36 trillion at the end of last year to N20.48 trillion by June 30, this year.

According to PenCom, the performance surpasses the N1.77 trillion increases recorded during the same period last year.

In addition to the surge in assets, CPS’ membership has also expanded significantly.

The report further showed that Pension Fund Administrators (PFAs) welcomed 189,619 new contributors from January to June, a worthy raise from the 146,920 onboarded during the first half of 2023.

By the end of June of the year, total CPS membership stood at 10,381,019.

PenCom stated: “These robust figures underscore the effectiveness of the PenCom’s regulatory and supervisory framework, which continues to enhance the performance and reliability of Nigeria’s pension industry.

“The significant growth in assets and membership reflects a strengthening of the financial security for workers, ensuring a more secure accumulation of funds for retirement and terminal benefits. As the CPS evolves and expands, it not only provides greater financial stability for contributors but also highlights the successful implementation of PenCom’s strategies in driving the pension sector forward”.

Understanding how pension fund grows

The commission also stated that a key feature of the CPS is the periodic growth in the pension contributions of Retirement Savings Account (RSAs) holders.

“This means that workers who participate in the CPS are assured of their pension contributions at retirement as well as returns accrued over time from the investment of their contributions. The CPS, which was introduced in June 2004 as an offshoot of the Pension Reform of 2004, is an arrangement where both the employer and the employee contribute a portion of an employee’s monthly salary towards the payment of pension at retirement. The PRA 2014 provides a minimum rate of contribution of 18 percent of the employee’s monthly emoluments, comprising 10 percent by the employer and eight per cent is contributed by the employee.

“However, the contributions accumulated in the RSAs of CPS participants grow over the years as the funds are invested by PFAs in safe financial instruments for fair returns. Section 85(1) of the PRA 2014 states: “All Contributions made under this Act shall be invested by the Pension Fund Administrator with the objectives of safety and maintenance of fair-returns on the amount invested. Also, section 85(2) states that Pension funds and assets shall only be invested in accordance with regulations and guidelines issued by the Commission, from time to time.

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“The Regulation on Investment of Pension Fund Assets provides that pension funds and assets shall be invested in bonds, bills and other securities issued by the Federal Government through the Central Bank of Nigeria, as well as state and local governments; bonds, debentures, redeemable shares and other debt instruments issued by corporate entities and listed on a Stock Exchange under the Investment and Securities Act; ordinary shares of public limited companies listed on a Stock Exchange under the Investment and Securities Act; bank deposits and securities; real estate development investments; specialist investment funds and such other financial instruments as approved by PenCom from time to time.

“The returns on these investments are seamlessly apportioned into the RSAs of employees. Consequently, PFAs are required to clearly state in the RSA Statements given to employees the breakdown of principal contributions and returns on pension assets. To ensure greater transparency, PenCom also requires PFAs to make public the unit prices of their pension investments on a daily basis and also disclose the three-year rolling average rates of returns on their pension fund investments.”

Meanwhile, PenCom stated that a key benefit of the CPS is that the interests generated from principal contributions are compounded over the years, leading to increased net pension savings for the contributor’s financial security during retirements.

“Since pension contributions are long term savings, compound interest builds returns on pension fund investments, which often outpaces the actual contributions. For instance, there are many RSA holders whose investment returns are higher than their actual contributions since they joined the CPS largely due to the significant returns from prudent investments.

“It is, therefore, incumbent upon employees to ensure timely remittance by employers in order to earn fair returns on their pension savings. This explains why the PRA 2014 provides that employers are obliged by law to deduct and remit pension contributions into their employees’ RSAs not later than seven working days from the date salaries are paid.

“PenCom requires employers who delay remitting pension contributions to pay the delayed contribution plus penalties.  This is to ensure that the employees are not denied the returns that their contributions would have generated if the remittance was timely. PenCom remains committed to the effective and efficient regulation and supervision of the pension industry to ensure that pension and retirement benefits are paid as and when due”, the commission added.  

• As 8,651 disengaged workers get N14.2b in three months

The National Pension Commission (PenCom) has approved the payment of N14.20 billion to 8,651 Retirement Savings Account (RSA) holders who were disengaged from work in the first quarter of the year, The Nation has learnt

The beneficiaries were under 50 years and did not secure jobs within four months of their disengagement.

From the inception of the Contributory Pension Scheme (CPS) to the end of last month, Pension Fund Administrators (PFAs) have paid N238.19 billion to 518,850 RSA holders who sought to access 25 per cent of their RSA balances due to temporary loss of employment.

This is how the CPS has been easing the impact of job loss on workers and the economy.

The Director-General, PenCom, Mrs. Aisha Dahir-Umar, made this known in a statement.

She maintained that an integral feature of the CPS is the provision of social security through benefits payments during temporary job loss.

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According to her, this innovative measure mitigates the impact of unexpected unemployment on RSA holders and helps alleviate the broader effects on the economy.

She stated that this social security for CPS participants underscores the scheme’s commitment to supporting individuals during challenging economic periods, promoting stability, and fostering resilience within the workforce.

She said: “The Pension Reform Act 2014 (PRA 2014) allows pension contributors to access 25 per cent of the balance in their RSA due to a temporary job loss. Section 7 (2) of the PRA 2014 states: “Where an employee voluntarily retires, disengages or is disengaged from employment as provided for under section 16 (2) and (5) of the PRA 2014, the employee may, with the approval of the Commission, withdraw an amount of money not exceeding 25 per cent of the total amount credited to his RSA, provided that such withdrawals shall only be made after four months of such retirement or cessation of employment and the employee does not secure another employment.

“The above provision of the PRA 2014 is one of the novel changes made by the CPS. Unlike the old Defined Benefits Scheme (DBS), which left many employees who lost their jobs without retirement benefits, Section 7(2) of the PRA 2014 guaranteed financial security to employees under the CPS as they have their RSA balances to fall back on in case of temporary job loss. It is pertinent to note that RSAs are individualised; therefore, account holders can change employers without the fear of losing their retirement benefits.

“Accessing 25 per cent of RSA balance in the event of a temporary job loss offers several significant benefits. It provides financial support to RSA holders facing temporary unemployment, helping them cover essential expenses such as rent, utilities, and other living costs during the period of job loss. The withdrawal option cushions the financial impact of job loss, reducing the stress and anxiety associated with sudden unemployment and enabling individuals to maintain financial stability.

“Significantly, accessing a portion of the RSA balance ensures that individuals can continue to maintain their standard of living and meet basic needs while seeking new employment opportunities.

“In addition, by accessing funds from the RSA, individuals can avoid falling into debt or resorting to high-interest loans to sustain themselves during the period of unemployment. By supporting individuals during temporary job loss, the CPS contributes to economic recovery by reducing the negative impact of unemployment on households and communities. Furthermore, having access to financial resources during unemployment can positively impact mental health and well-being, reducing stress and promoting resilience,” he noted.

The PenCom DG also said their swift and impactful response to the financial needs of unemployed RSA holders underscores the importance of a progressive and adaptable regulatory environment.

She stressed that with its commitment to empowering workers, PenCom continues to pave the way for a more secure and promising future for all RSA holders.

“However, the PRA 2014 provides that where an employee has accessed the 25 per cent for temporary loss of job, such employee shall subsequently access the balances in the retirement savings account only at the time of retirement.

“Notwithstanding the provision of section 7(2) of the PRA 2014, it is pertinent for RSA holders to understand that the CPS is designed to cater for life at retirement. Therefore, the RSA is unlike the regular savings account with a commercial bank, where a customer deposits and withdraws funds at any time. Consequently, all withdrawals from an employee’s RSA are based on conditions allowed under the PRA 2014, including the 25 per cent access for temporary job loss.

“Notably, an employee who had accessed his RSA balance due to job loss is expected to resume pension contribution once he secures another employment by providing his new employer with his RSA details. Overall, accessing 25 per cent of the RSA balance in the event of temporary job loss under the CPS provides essential financial relief and support, fostering economic stability and individual resilience in challenging times,” she added.