The Nigeria Pension Act was reformed in 2004. It made it compulsory for employers of labour in Nigeria to set up a Pension Scheme for their workers. This is a contributory scheme, that is, the employers and the employees jointly contribute towards the scheme. In addition, it is mandatory for the employer to provide Group Life Assurance for their employees.

Objectives of the Pension Reform

  • To ensure that every workers receives his retirement benefit as and when due.
  • To assist workers to save in order to cater for their livelihood during old age so as to reduce old age poverty
  • To stem the growth of outstanding pension liabilities
  • To create and establish uniform rules, regulations and standards for administration of pension matters
  • To regulate and supervise the establishment and management of retirement benefits scheme.


Nature of the Scheme

  • Contributory: Employer and employee to jointly contribute minimum of 15% employee total emoluments to Retirement Savings Account (7.5% by employer & 7.5% by employee)
  • Fully Funded: If an employer elects to bear the burden of the scheme, a minimum of 15% of monthly emoluments of the employee shall become payable by the employer.
  • Emoluments mean: A total sum of basic salary + housing allowance + transport allowance.

Coverage & Exemption

  • It is meant for the Public Service and employers of labor that have five or more personnel in the private sector.
  • Employers with three years or less to retirement are exempted.
  • Existing pensioners are also exempted.

Retirement Savings Account

  • Employer to deduct and remit to Pension Assets Custodian (PAC) within seven days of pay day
  • PAC to notify Pension Fund Administrators (PFA) who would in turn credit the employees RSA


Withdrawal from Retirement Savings Account

The employees must be 50 years of age before he/she can withdraw except on grounds of ill health or permanent disability.

Withdrawal can be allowed before age 50 if retirement is in accordance with the terms and condition of his employment.


Retirement benefit is the accumulated fund in the retirement saving account. It can be utilized as follows:

(a)     A lump sum cash withdrawal that will not affect the purchase of

annuity for life of not less than 50% of annual remuneration atretirement.

(b)      Retirement before age 50, not more than 25% of accounts balance

after six months of retirement and not in another employment.

Survivor and Disability Benefits

  • Employer shall maintain life assurance of three (3) times total emoluments in favour of each employee.
  • Upon death and disability the benefit under life assurance will be paid to the RSA.

Provisions for withdrawal from RSA shall apply and benefit is paid to designated beneficiary