FAQs
The PRA was enacted in June 2004. Having implemented the PRA for a decade, a review was conducted with a view to improving various provisions based on practical experiences. Consequently, it was repealed and re-enacted in July 2014 as the Pension Reform Act of 2014.
The main objective of the CPS is to ensure that every person who worked in either the Public or Private Sectors in Nigeria including the self-employed persons receives his/her retirement benefits as and when due.
Judicial officers, Members of the Armed Forces, the Intelligence and Secret Services of the Federation, existing retirees prior to June 2004 and employees who had 3 years or less to retire as at June 2004.
No. The RSA holds the employee’s monthly pension contributions, which are remitted through the employer for the exclusive purpose of providing retirement income. The PFA invests the funds in allowable investment outlets and the income generated is fully credited into the RSA. Withdrawals are not permissible by contributors except at retirement or upon temporary loss of job and in all cases, withdrawals are subject to approval by the National Pension Commission (PenCom).
A PFA is a company licensed by the National Pension Commission for the sole purpose of managing and administering pension funds contributed into the RSAs.
The PFA manages and invests the pension funds on behalf of contributors while the PFC keeps the pension funds and assets in safe custody and carries out transactions on behalf of the PFA.
The CPS is fully funded through the monthly pension contributions into the employee’s RSA, which are managed by the PFA and held in safe custody by the PFC. These funds are readily available for payment of benefits at retirement. The DB Scheme or PAY-AS-YOU-GO is not funded and is dependent solely on budgetary allocation to pay a predetermined amount as benefits at retirement.
The PRA 2014 primarily applies to Nigerian citizens working in Nigeria and does not cover expatriate employees. However, such expatriate employees are entitled to make voluntary contributions under the Contributory Pension Scheme.
The PRA 2014 applies to Nigerians working in Nigerian Missions abroad if these workers are employees of Nigerian institutions required to implement the CPS under the PRA 2014 as in the case of career diplomats routinely posted to missions abroad. However, where the Nigerian Missions employ Nigerians as local temporary support staff in the respective host countries in line with their domestic laws, the PRA 2014 will not apply to these workers.
When a person resigns from an organization operating in Nigeria and takes up an appointment with an organization outside Nigeria, such an employee is entitled to make arrangements with the new employer to continue remitting his pension contributions to his RSA in Nigeria. In the event that such an employee chooses to discontinue contribution under the scheme in Nigeria or where the new employer has an entirely different pension arrangement, he can access his RSA upon retirement or attaining the age of 50 years, whichever is later.
The PRA 2014 allows self-employed individuals to make voluntary contributions under the scheme towards their retirement. The Micro Pension Scheme has been tailored for this category of participants.
Existing employees of an organization that is operating an AES are entitled to choose to remain or opt out of the Scheme. If they opt out, they can open RSAs with any PFA of their choice and request their retirement benefits be transferred. However, the PRA 2014 has provided that all new employees of such organisations cannot join the AES and must join the CPS by opening Retirement Savings Accounts (RSAs) with PFAs of their choice.
All employees are expected to keep and maintain only one Retirement Savings Account throughout their working career.
An RSA holder should not, under any circumstance, have more than one account. Multiple registrations result in delayed, incorrect remittances into the RSA account. It also causes an undue delay in benefit payments since it is not possible for any contributor to be paid from two RSAs.
The pension funds and assets, which are totally separated from the PFA’s operational funds, are kept in safe custody by the PFC and as such the liquidation of the PFA will not affect the funds and assets. In addition, every PFA is expected to maintain, under the PRA 2014, a statutory reserve fund, from the company earnings, as a contingency fund to meet claims for which it may be liable.
The Pension Reform Act 2014 allows an employee to complain about his/her PFA to the National Pension Commission on all issues.
There is no qualifying period for a pension. If an employee works for an employer, his pension contribution will be paid by the employer into the employee’s RSA for the period of his service. However, access to the contributions must be in line with the provisions of the PRA 2014.
Every employee is entitled to pension and gratuity that may have accrued under the old pension scheme. The total accrued benefit is calculated and provisions made by employers to credit the amounts determined to the respective RSAs of the beneficiaries.
A company can obtain a Certificate of Compliance by formally applying to the Commission and attaching the following documents:
- Evidence of remittance of monthly pension contribution(s) to the RSAs of employees which should include: a comprehensive list of employees of the organization; current staff payroll; and schedule of contributions indicating the name of the PFA, names of the employees, RSA PIN and employer/employee contributions.
- Evidence of remittance of pension contributions from inception to date in the form of photocopies of bank deposit slips and payment instruments.
- Evidence of transfer of assets meant for any pre-2004 retirement benefits scheme into the employee’s RSA.
- Evidence of valid Group Life Insurance policy which should include a Certificate of Group Life, Policy Document and Evidence of payment.
Section 103 of the PRA 2014 provides punishments varying from fines to imprisonment for different offences under the Act committed by companies and/or Management of such companies as the case may be.
Such dissatisfied person or operator may refer the matter to arbitration in accordance with the Arbitration and Conciliation Act or to the Investment and Securities Tribunal established under the Investment and Securities Act 1999.
Where an employer fails in the statutory responsibility to remit pension contributions of his employees, the concerned employee(s) should complain directly to the Commission. The name and address of the defaulting employer should be provided to enable the Commission to engage the employer without compromising the confidentiality of the complainant.
The minimum rate of contributions is 18% of the employee’s monthly emoluments where 10% is contributed by the employer and 8% is contributed by the employee.
The CPS covers all employees in the Public Service of the Federation, Public Service of the Federal Capital Territory, States and Local Governments, the Private Sector and the self-employed persons (Informal Sector).
A Retirement Savings Account (RSA) is an account opened by an employee with a PFA of his/her choice into which all pension contributions and returns on investment are remitted. It is also from the RSA that retirement and death benefits are paid.
The PRA 2014 stipulates that when an employee fails to open an RSA within a period of 6 months after the assumption of duty, the employer shall request a PFA to open a nominal Retirement Savings Account for the remittance of the employee’s pension contribution.
The National Pension Commission (PenCom) is an Agency of the Federal Government of Nigeria established by the PRA 2004 to regulate and supervise all pension matters in Nigeria. In executing its mandate, it licenses and regulates all pension operators and ensures an effective administration of pension for the benefit of contributors and retirees.
The main objective of the CPS is to ensure that every person who worked in either the Public or Private Sectors in Nigeria including the self-employed persons receives his/her retirement benefits as and when due.
The PRA 2014 is applicable to Nigerian citizens working in Nigeria. However, the Commission has issued Guidelines for Cross-Border Arrangements in order to encourage Nigerians working abroad to participate in the scheme on a voluntary basis.
A Nigerian previously working abroad shall be part of the Contributory Pension Scheme, if upon return to the country, has secures a formal employment in Nigeria. Where the person is not in any employment, he/she may make voluntary contributions under the Scheme.
Employees on temporary, contract or tenured appointments may decide to join the CPS by opening RSAs and making monthly pension contributions.
Movement from one employment to another does not affect pension under the CPS. Upon change in employment, the employee is only required to give the new employer his/her existing RSA details into which payment of subsequent monthly pension contributions would continue.
Existing employees of a company that operates a CPFA may remain covered by the CPFA, but all new employees of such company MUST join the CPS by opening RSAs with PFAs of their choice.
This occurs when a contributor opens more than one RSA either with the same PFA or with different PFAs.
The safety of pension assets is assured by the separation of management and custody functions undertaken by licensed PFAs and PFCs respectively. In addition, there is daily monitoring of all investment activities of the PFAs by the National Pension Commission. Moreover, there are stringent provisions in the Regulations for the Investment of Pension Fund Assets that ensure the ring-fencing of the assets and allow investments only in instruments with minimal risks. There is also a sealed guarantee that in case of any infraction, the PFC or its parent company will pay any amount that may be lost due to that infraction.
The pension funds in the custody of a PFC cannot be used to meet any claim in the event of liquidation, winding up or otherwise cessation of business of the custodian or any of its shareholders. Furthermore, the liquidation of a PFC will not affect the pension assets in its custody as the PFC only keeps investment certificates and records. The only cash being held by the PFC comprises of monthly contributions before decisions are made by the PFA to investment it. The Commission has the power and responsibility in such situations to transfer the pension fund assets being held by any failed PFC to another PFC.
How is Compulsory or Voluntary Retirement Handled Under the CPS, if this Happens Before the Age of 50 Years?
Upon retirement, an employee can withdraw a lump sum from the balance standing to the credit of his/her RSA provided the balance after the withdrawal could provide an annuity or fund monthly payments through programmed withdrawals. However, an employer may choose to pay any other severance benefits (by whatever name is called) over and above the retirement benefits payable to the employee under the PRA 2014.
The Act did not stipulate any retirement age. Retirement age depends on each employee’s terms and conditions of employment.
The PRA 2014 has made compliance with its provisions not mandatory for organizations that employ less than three staff. The Commission is not obliged to issue clearance letters to such organizations.
Such an employer has committed an offence and is liable to a fine of not more than N250,000.00 or to imprisonment for a term not exceeding one year or to both fine and imprisonment.
An employer is obliged to commence the deduction of pension contributions for a new employee from his first salary.
An employee’s Annual Total Emolument is the total sum of basic salary and allowances payable as his/her remuneration for one year, as may be provided under the salary structure or terms and conditions of his/her employment.
The minimum rate of contributions is 18% of the employee’s monthly emoluments where 10% is contributed by the employer and 8% is contributed by the employee.
Where there is a difference, the employee should approach his PFA and employer for reconciliation. Where it is established that there is an underpayment of the monthly contributions, the employer must remit the difference into the RSA of the employee.
The PRA 2014 has not categorized workers on a permanent or casual basis. Employers are mandated to remit the pension contribution of every worker on its payroll. For staff whose salaries are not broken into basic, transport and housing allowances, the pension contributions should be based on the salary payable.
The PRA 2014 defines ‘monthly emoluments” as total monthly basic salary, housing allowance and transport allowance.
Pension contributions are paid directly to the PFC by the employer to be held on the order of the PFA. The PFC notifies the PFA immediately upon receipt of the contributions.
Such employer shall in addition to making the remittance already due, be liable to a penalty to be stipulated by the Commission, which will be paid to the employees, provided that the penalty shall not be less than 2% of the total contribution that remains unpaid for each month while the default continues.
Yes. The guideline issued by the Commission and NAICOM provides that any employer that has an existing policy whose terms are better than 3 times the Annual Total Emolument (ATE) should maintain such policy. Therefore, the employer may provide life insurance coverage over and above the minimum required.
The Pension contributions of FG or employees of Treasury Funded Ministries, Departments and Agencies (MDAs) are deducted at source and lodged into a Contributory Pension Account with the CBN. The Commission computes the pension contributions and advises the CBN to credit the contributions directly to the PFCs. However, for Federal Government employees who are already on the Integrated Payroll and Personnel Information System (IPPIS), the Office of the Accountant General of the Federation (OAGF) remits their contribution to their respective PFCs.
Such an employee should write a complaint to his PFA. He may also inform the Pension Desk Officer (PDO) and provide all necessary documents, as may be advised by the PFA, for onward delivery to the Commission. The documents will be verified and the necessary remittance of his/her accumulated contributions will be made in all verified cases.
The pension contributions are being invested in Treasury Bills by the CBN. The pension contributions and incomes from such investment would in due course be computed and remitted to the RSAs of the affected contributors proportionately.
The Retirement Bond represents the accrued retirement benefits for the past services rendered by employees of the Treasury Funded Ministries, Departments and Agencies of the FGN, State and Local Governments before the commencement of the CPS. The amount is calculated by qualified actuaries and is transferred to the RSA upon retirement.
The PRA 2014 has, for the purposes of payment of retirement benefits in the public service of the Federation and FCT, abolished the practice of “transfer of service”.
Consequently, employees who transferred their services after the enactment of the PRA 2004 have the responsibility to arrange with their previous employers to pay their retirement benefits for the periods they worked for the previous employers.
All FGN employees who retired prior to June 2004 and employees who had 3 years or less to retire as of 30 June 2004 were covered by the Old Defined Benefit Scheme (DBS). The Pension Transitional Arrangements Directorate (PTAD) was established in accordance with Section 42 (1) of the PRA 2014 to handle all payments of pensions to FGN retirees under the Old Defined Benefit Scheme. In the case of the Private Sector, the terms and conditions upon which employees retire would apply for the payment of their retirement benefits.
The employee’s portion of the pension contributions would be refunded to the affected employee while the employer portion would be transferred back to the FGN.
The Federal Government provides Group Life Insurance coverage for its employees through the coordination of the Office of the Head of Service of the Federation (OHOSF).
In order to prevent conflict of interest, an organization cannot own shares in both a PFA and a PFC. This is to strengthen the checks and balances between the licensed pension operators under the strict supervision of the National Pension Commission. Furthermore, the Commission does not approve a single individual or institution to have a controlling shareholding in more than one Pension Operator.
The PRA 2014 provides that pension funds or assets in the custody of the Custodian shall not be seized or be subject to execution of a judgment debt.
Governments at Federal, state and Local levels can only access pension fund assets through investments made by the PFAs in Treasury Bills issued by the Central Bank of Nigeria or Bonds (including Sukuk) approved by the Securities & Exchange Commission (SEC) and other relevant Institutions.
No. PFAs are only allowed to invest in instruments in line with the PRA 2014 and Regulations on Investment of Pension Funds. In addition, PFAs are closely monitored, on a daily basis, to ensure that they adhere strictly to the Regulations.
The rates of return on pension fund investments vary from year to year, based on the economic outlook and performance of the Nigerian financial markets, as well as the investment strategies of the various Pension Fund Managers. However, the Commission monitors the PFAs to ensure that returns are competitive based on market conditions.
Clearly defined fees (Administration, and Asset/Income Based Fees) are charged by the operators for their services in line with the Regulation on Fees Structure issued by the Commission.
The Investment Regulations allow indirect investment of pension funds in infrastructure through Infrastructure Funds or Bonds. These investments recognize the need for channelling pension funds towards economic development through safe and viable investment outlets.
Section 77(2) of the PRA 2014 prohibits a PFA from keeping any pension fund assets with a PFC in which the PFA has any business interest, shares or any relation whatsoever.
The PRA 2014 and the Regulation on Investment of Pension Fund Assets issued by the Commission clearly stipulate the allowable financial instruments in which pension fund assets can be invested. The instruments allowed are Equities; Federal Government Securities; State/Local Government Bonds; Corporate Debt Securities; Money Market Instruments; Open/Closed-end Funds; Infrastructure Bonds & Funds; Private Equity Funds and any securities/instruments that may be approved by the Commission, from time to time.
No. The investment decisions are made by the PFA, however, the new Investment Regulations on Multi-Fund Structure allow a contributor to choose the Fund through which his/her pension contributions would be invested based on their age group and risk appetite in line with the provisions of the PRA 2014.
All income earned from the investment of pension funds under the PRA 2014 is remitted into the RSAs of contributors.
The PFAs have a duty to make safe investments that would yield fair returns for the contributors as stipulated by the PRA 2014 and the Regulations on the Investment of Pension Fund Assets. In addition, a Pension Protection Fund was established by the PRA in 2014 to compensate for any erosion in the value of pension contributions during severe economic downturns.
Yes. The PRA 2014 allows a contributor to utilize part of the RSA balance towards payment of equity contribution for a mortgage to own a primary home subject to Guidelines issued by the Commission, which spells out the detailed eligibility requirements and modalities.
Where an employee who has been contributing under the CPS dies before his/her retirement, his benefits shall be paid to his beneficiary as he/she provided under a will or to the next of kin. In the absence of such designation, the benefit shall be paid to any person appointed by the Probate Registry as the administrator of the estate of the deceased.
Where an FGN employee is promoted after enrolling for the payment of accrued pension rights with the Commission, a copy of the promotion letter indicating grade level and step and effective date should be forwarded to the Commission along with a copy of his/her registration slip obtained during the enrolment exercise. These will be used to compute and pay any difference in the accrued benefits that may occur as a result of the promotion.
The balance in the RSA will be applied towards the payment of monthly pension to the retiree on programmed withdrawal. In the case of an annuity, it is applied to procure a monthly annuity for life from a Life Insurance company.
This is a mode of withdrawal by which a retiree receives a pension through his Pension Fund Administrator (PFA) on a monthly or quarterly basis over an estimated life span. The RSA balance is being re-invested by the PFA to generate more income/funds for the retiree. When a retiree dies, any balance in the RSA will be paid to the duly nominated beneficiaries.
A retiree who has contributed for a specified number of years shall be entitled to a guaranteed minimum pension, which will be determined by the Commission from time to time, under the Guidelines for Minimum Pension Guarantee (MPG).
Monthly pension and lumpsum may differ due to the following reasons:
- their grades, ranks, and salary steps may differ as of June 2004;
- the magnitude of their contributions to RSA may vary during their pension accumulation phases;
- their respective PFAs may operate different strategies for the investment of pension funds and generate different investment incomes; and
- they may at retirement, withdraw different amounts as lumpsum giving a higher monthly pension to the one who withdrew a lower amount as lumpsum due to a higher RSA balance after the lump sum withdrawal.
Upon the death of an employee, the employer/Next of Kin (NoK) or representative of the deceased shall notify the PFA, who in turn shall inform the Commission with supporting documents. The deceased’s consolidated benefits are, thereafter, paid in bulk to the Executors of his estate or to any person appointed by the Probate Registry as the Administrator of his estate to enable them to apply the same in favour of his beneficiaries. The employer should also process the proceeds of the life insurance policy and ensure payment by the insurance company to the beneficiary.
Section 9 of the PRA 2014 stipulates that where a missing employee is not found within a period of one year from the date he was declared missing and a Board of Inquiry set up by the Commission concludes that it is reasonable to presume that the employee is dead, the consolidated benefits of such missing employee would be paid by the PFA in bulk to the Executors or the Administrator of the Estate of the deceased person in accordance with section 8 of the PRA 2014.
The premium for the Group Life Insurance Policy is to be paid by the Employer. The employee does not bear any cost to this effect.
Yes. It is possible for a retiree to change to a Life Annuity after collecting his retirement benefits through Programmed Withdrawal for some time. At that time, the remaining balance in the RSA will be utilized as a premium to purchase the Life Annuity from an insurance company, which will be paying him monthly pensions.
The timeline for approval of benefits payment is not more than five (5) working days from the date the Commission receives the application and supporting documents from the PFA.
Such an employee may re-enter the Scheme upon securing new employment. The new employer would commence remittance of the employee’s pension contributions into his original RSA.
A holder of an RSA shall have access to his/her RSA upon retirement based on the condition of service or upon attaining the age of 50 years (whichever is later) or is medically incapacitated. Where an employee voluntarily retirees, disengages or is disengaged, he/she can have access to 25% of his/her RSA provided that such employee is unable to secure another employment after 4 (four) months of such retirement.
This can be allowed provided the amount left in the RSA after that lump-sum withdrawal shall be sufficient to fund a Programmed Withdrawal or annuity of not less than 50% of the retiree’s annual remuneration as at the date of retirement.
An annuity is a stream of income purchased from a Life Insurance company. It provides a guaranteed periodic income (pension) to a retiree throughout his/her life after retirement. Under the CPS, an annuity is guaranteed for ten years. If the retiree dies within ten years of retirement, the monthly annuity/pension will be paid to his beneficiaries for the remaining years up to ten years.
For example, if a retiree who chose an annuity dies six years after retirement, his monthly annuity/pension will be paid to his beneficiaries for the next four years. The retiree can buy an annuity contract by paying a portion of his retirement benefits as a premium to an insurance company which in turn provides the monthly/quarterly payments (annuity), subject to the Regulations jointly issued by the National Pension Commission and National Insurance Commission.
As stipulated in Section 7(2) of the PRA 2014, this category of employees is entitled to withdraw not more than 25% of their RSA balances as at the time of retirement provided they have been out of the job for 4 months and have not secured another employment.
The consolidated benefits of a deceased employee include the proceeds of his/her accumulated contribution plus any income that accrued from investing the contributions, benefits from the life insurance policy and accrued pension benefits.
For a deceased person who did not open an RSA before his death, the NoK should open a Death Benefit Account (DBA) with any PFA of his/her choice through which the deceased’s entitlements and proceeds of Life Insurance Policy would be paid.
Section 4(5) of the PRA 2014 makes it mandatory for every employer to maintain a life insurance policy in favour of its employees for at least 3 times the annual total emolument of the employees. The employer is still obligated to pay the equivalent amount of the Group Life insurance to the deceased beneficiaries in the event that it does not have a current Policy with an Insurance Company.
No. Employees are covered for the period in which they are in active service of the employer. Hence, the policy does not cover the employee after disengagement/retirement from the service of the employer.
At the moment this is not allowed. Once a retiree has chosen to collect his benefits by annuity, he is not allowed to change back to Programmed Withdrawal. The retiree can only change his annuity contract from one insurance company to another after two years based on the Surrender Value between the insurance companies.
The PRA 2014 provides that pension should be increased every five years or whenever there is an increase in the salaries of active workers in line with the provisions of Section 173 of the 1999 Constitution (as Amended).
The PRA 2014 allows employees to, in addition to the 18% employee and employer contributions, make voluntary contributions to their RSAs.
The PRA 2014 stipulates that pension contributions made by an employee under the Scheme shall not be taxed. However, income earned on voluntary contribution would be taxed if withdrawn before 5 years from the date the contribution was made.
Subject to such guidelines as may be issued from time to time by the Commission, an existing pensioner may make voluntary contributions under the scheme.
The username is always your PIN while the default password at FIRST login is your account number
No, every contributor with CrusaderSterling pensions is automatically onboard the App. Just use your PIN and account number at first login.
No, the two systems maintain distinct credentials. Your default credentials for the mobile App are PIN as username & Account number as password.
At first login, your PIN & Account numbers are your username and password respectively. However, you will be prompted to change your password immediately.
Yes, statements request is a feature on the App that sends Account statements based on a selected period to the contributor’s registered email.
The pension funds contributed to the NSITF before the commencement of the CPS, including all investment incomes, shall be transferred to the RSA opened by the respective NSITF contributor.
NSITF will continue to provide social security services other than pensions to the country.
The contributions to NSITF made by those exempted from the CPS shall be computed in line NSITF Act and paid into their individual bank accounts.
