10 Surprising Facts About The Pension Scheme in Nigeria

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April 13th, 2024, 7:55 am


In Nigeria, planning for retirement is made more systematic and secure with the introduction of the Contributory Pension Scheme (CPS), governed by the Pension Reform Act. This scheme is designed to ensure that employees from both the public and private sectors, as well as self-employed individuals, have a stable financial future post-retirement. Here, we delve into the ten critical aspects of the CPS, providing insights into how it operates, the benefits it offers, and the peace of mind it aims to bring to its contributors.

1. Inclusive Participation

The CPS is inclusive, allowing employees in the public and private sectors, as well as self-employed persons, to participate. This broad eligibility ensures that a larger segment of the Nigerian workforce is covered under the pension scheme, securing their future financially.

2. Contribution Rates

The scheme mandates a minimum total contribution of 18% of an employee's monthly emolument, which is divided between the employer (10%) and the employee (8%). This shared responsibility not only eases the financial burden on the employee but also fosters a spirit of co-investment towards the employee’s retirement.

3. Micro Pension Plan for Self-employed Workers

Self-employed workers have the opportunity to secure their retirement through the Micro Pension Plan. This plan allows them to open Retirement Savings Accounts (RSAs), make regular contributions, and even make withdrawals under specific conditions, enhancing flexibility and accessibility for entrepreneurs and freelancers.

4. Investment of Contributions

Pension Fund Administrators (PFAs) are responsible for investing the contributions in the RSAs. The income generated from these investments is then proportionately distributed back into the contributors' RSAs, ensuring that the pension funds grow over time through careful and strategic investment.

5. Entitlements and Withdrawals at Retirement

Upon retirement, contributors are entitled to a lump sum payment from their RSA balance. Following this, they receive monthly stipends either through Programmed Withdrawal (PW) managed by PFAs or Life Annuity (LA) provided by life insurance companies, offering a steady income during retirement.

6. Retirement Conditions

Contributors can start receiving monthly stipends once they reach the age of 50 and are no longer engaged in paid employment, or if they are medically incapacitated, ensuring financial support when it is most needed.

7. Early Access in Special Circumstances

In cases of voluntary early retirement or disengagement before the age of 50, contributors can access 25% of their RSA if they are unable to secure employment four months after leaving their job. This provision offers a safety net during transitional periods in a contributor's career.

8. Provisions for Deceased Contributors

If a contributor dies before retirement, the benefits are transferred to a named beneficiary under a will or to the next of kin. In the absence of such a designation, the benefits are handled by a person appointed by the probate registry, ensuring the contributor's family or designated persons receive the financial benefits.

9. Regular Income in Retirement

The cornerstone of the CPS is to provide a regular, monthly income to contributors in their retirement, safeguarding their well-being during their elder years when they may no longer have the ability to earn an income.

10. Ensuring Future Financial Stability

The CPS is fundamentally about providing financial stability and security to its contributors in their post-working years, ensuring that every participant receives the benefits of a life of hard work and contributions once they retire.


The Contributory Pension Scheme in Nigeria represents a robust framework designed to secure the financial future of its workforce. By mandating contributions from both employers and employees, investing these funds wisely, and ensuring strict regulations and protections are in place, the CPS not only supports retirees but also contributes to the economic stability of the country. Understanding and participating in this scheme is crucial for every eligible Nigerian worker, as it promises a safer, more secure financial future in their golden years.

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