What pension means
Nigeria runs a contributory pension scheme, which means the money is saved as you earn rather than promised for later.
Both employer and employee contribute a percentage of monthly emoluments into a Retirement Savings Account held in the employee's own name with a Pension Fund Administrator.
The account belongs to the employee and follows them between jobs. It is not the employer's money and it is not the employer's to withhold.
How it is used
The employee opens a Retirement Savings Account with a PFA of their choice and gives the details to the employer. The employer deducts the employee's contribution from salary, adds the employer contribution, and remits both to the PFA.
That remittance is the part that goes wrong. Deducting from salary and not remitting is a serious breach, and it is one of the most common complaints Nigerian employees make about employers.
Key features
- Contributory, with both employer and employee paying monthly
- Governed by the Pension Reform Act 2014
- Minimum contributions are 10 percent from the employer and 8 percent from the employee
- Held in a Retirement Savings Account in the employee's name with a PFA
- Portable, so the account moves with the employee between jobs
- Regulated by the National Pension Commission, PenCom
How this works in Nigeria
The scheme applies to employers with a specified minimum number of employees, and smaller employers have historically fallen outside the mandatory net, though many participate anyway.
Employees should check their PFA statements rather than assuming. Where an employer has deducted and not remitted, the statement shows it immediately, and raising it early is far more effective than discovering years of missing contributions on leaving.
PenCom is the regulator, and complaints about non remittance can be pursued through it.
Pension vs gratuity
Pension is statutory and contributory. Money goes into your own retirement savings account monthly, it belongs to you, and it moves with you between employers.
Gratuity is a lump sum for long service, paid by the employer when you leave. In the private sector it is contractual, so it exists only where your contract, handbook or a collective agreement provides for it.
An employee can be entitled to both, or to pension alone. Employers sometimes describe gratuity as though it replaces pension obligations, which it does not.
Limits and risks
Access is restricted. The scheme is designed for retirement, and while there are provisions allowing limited access in defined circumstances such as loss of employment, it is not a savings account you can draw on freely.
The value also depends on the fund's performance and on contributions actually being remitted. An account that looks healthy on paper is worth nothing if the employer stopped paying in two years ago.
Worth knowing
Check your PFA statement at least twice a year. Deductions taken from your salary but never remitted are common, and they are far easier to recover while you still work there.
Questions people ask
How much is pension contribution in Nigeria?
The Pension Reform Act 2014 sets minimum contributions of 10 percent from the employer and 8 percent of monthly emoluments from the employee. An employer may contribute more, and some pay the full amount.
Is pension the same as gratuity?
No. Pension is the statutory contributory scheme funded monthly into your own retirement savings account. Gratuity is a lump sum for long service paid by the employer at exit, and in the private sector it is contractual rather than statutory.
What happens to my pension when I change jobs?
Nothing. The Retirement Savings Account is in your name and moves with you. You give the same account details to your new employer, who begins remitting into it.
What if my employer deducts pension but does not remit it?
That is a serious breach and it is visible on your PFA statement. Raise it in writing with the employer, and it can be pursued through the National Pension Commission. Acting early is far more effective than discovering it after you leave.
Does every Nigerian employer have to provide pension?
The mandatory scheme applies to employers meeting the specified employee threshold. Smaller employers have historically fallen outside it, though many participate voluntarily, and the position has been tightened over time.