CrusaderSterling Pensions

FAQs

General Questions
When was the Pension Reform Act (PRA) enacted?

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 Consequently, it was repealed and re-enacted in July 2014 as the Pension Reform Act of 2014.

What is the Main Objective of CPS?

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.

Who is Exempted from the CPS?

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.

Does the RSA Operate Like a Bank Account?

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).

Who is a Pension Fund Administrator (PFA)?

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.

What is the Difference Between a PFA and a PFC?

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.

How is the Contributory Pension Scheme (CPS) Different from the Old Defined Benefits Pension Scheme (DB)?

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.

Does the PRA 2014 Apply to Foreigners Employed in Nigeria?

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.

Does the PRA 2014 Apply to Nigerians Working in Nigerian Missions Abroad?

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.

What Happens to the RSA of a Person Who Resigns from an Organization Operating in Nigeria and Takes Up Appointment with an Organization Outside Nigeria?

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.

Can Self-Employed Persons Participate in the Scheme?

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.

Where an Organisation has an Approved Existing Scheme (AES), is it Mandatory for All Employees to Join the Existing Scheme?

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.

Can an Employee Have Two Accounts in Two or More Different PFAs?

All employees are expected to keep and maintain only one Retirement Savings Account throughout their working career.

What are the Implications of Multiple Registration?

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.

What Happens if a PFA Fails or is Liquidated?

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.

Who Can I Complain to if I have a Problem with my PFA?

The Pension Reform Act 2014 allows an employee to complain about his/her PFA to the National Pension Commission on all issues.

What is the Minimum Period Required by an Employee to Qualify for Pension Under the New Scheme?

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.

Are Pension Benefits for Services Rendered Under Old Scheme Going to be Paid to the Contributors Under the CPS?

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.

How Can Companies Obtain Certificates of Compliance?

A company can obtain a Certificate of Compliance by formally applying to the Commission and attaching the following documents:

  1. 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.
  2. Evidence of remittance of pension contributions from inception to date in the form of photocopies of bank deposit slips and payment instruments.
  3. Evidence of transfer of assets meant for any pre-2004 retirement benefits scheme into the employee’s RSA.
  4. Evidence of valid Group Life Insurance policy which should include a Certificate of Group Life, Policy Document and Evidence of payment.
What Penalties Does the Commission Have for Companies that Default in Complying with the PRA 2014?

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.

What Happens Where a Contributor, Beneficiary or Pension Operator is Dissatisfied with a Decision or Action Taken by the Commission?

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.

What Should Be Done When Pension Deductions are Not Remitted by Employers?

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.

What Are the Rates of Monthly Pension Contribution Under the CPS?

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.

Who is covered by the Contributory Pension Scheme (CPS)?

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).

What is a Retirement Savings Account (RSA)?

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.

What Would Happen to an Employee Who Fails to Open a Retirement Savings Account as Prescribed by the PRA 2014?

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.

Who is a Pension Fund Custodian (PFC)?
A PFC is a company licensed by the National Pension Commission for the sole purpose of keeping safe custody of pension assets on trust on behalf of contributors. The PFC receives pension contributions from employers on behalf of PFAs, settles investment transactions on the order of the PFA, effects payments of benefits and undertakes other administrative functions.
What is the Role of the National Pension Commission (PenCom)?

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 e