Nigerians are eager to know the nitty-gritty of a pension scheme and how pension fund can be withdrawn at retirement without queuing up at government ministries and offices in the scourging sun.

A Pension contributory scheme is designed to ensure employees derive the benefit of adequately being paid their pension as it is due upon retirement. This fund is regulated by the Pension Commission.

Here are 12 things you should know as a Nigerian worker on your retirement pay:

1. Every eligible Employee (private or public) shall maintain a Retirement Savings Account (RSA) in his or her name with the Pension Fund Administrator (PFA).

2. Employees are expected to contribute 7.5% of their (Basic, Housing and Transport allowance) every month. Your employer deducts this amount from your salary every month. The total contribution of at least 15% of your Basic, Housing and Transport Allowance is then transferred at the end of the month to your Retirement Savings Account, which is opened in your name by your Pension Fund Custodian.

3. The contributions would be managed and administered by Professional Fund Administrators and held in custody by licensed Pension Fund Custodians.

4. At retirement, the amount in the employee’s Retirement Savings Account would be the total contributions plus income and capital gain earned on the contributions made.

5. In case of sudden death, the next-of-kin as provided by the deceased to the PFA will be contacted to provide relevant documents for processing the contributions. The contributions will be paid to the named beneficiary in the WILL of the Letter of Administration.

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6. At retirement, a retiree is entitled to a - lump-sum
- an amount not less than 25% and not more than 50%. This amount is however dependent on the fact that the retiree is able to collect monthly pensions of not less than 50% of his/her last salary (computed based on the housing, basic and transport) for an estimated period of at least 18 years.

7. What Happens After taking the Lump-sum: When you retire and take an initial lump sum from your RSA, the rest of the money will either be used to procure an annuity (a fixed sum of money paid to someone each year, typically for the rest of their life) for you, or it will be used to fund a programmed withdrawal that pays you for an estimated lifespan of not less than 18 years - in real term - for life.

8. How to get funded at retirement: The process of documentation actually starts six months before you retire. For FG employees, they have to go for the Bond verification exercise organised by PENCOM. Basically, this exercise is to enable PENCOM to consolidate their account and ensure their accrued rights are paid immediately once they retire. For Private sector employees, your PFA has to confirm that all contributions due to you have been made. This process is called ‘consolidation of account’. After this is done, the process of actual payment should take about 3 weeks.

9. Payment procedure: The programmed withdrawal means you get to choose your payment interval by yourself. You can choose to be paid your pension monthly or quarterly depending on what you think works best for you. Your PFA will be crediting your bank account according to the plan you choose.

10. Withdrawing from your Account before retirement: The pension reform Act, 2014 provided withdrawer from your RSA before you retire if you are out of employment for four months and are unable to secure another employment. You will be given 25% of your RSA balance. After this 25% has been withdrawn for your RSA, the balance cannot be touched until retirement.

11. Can you pay additional and voluntary amounts into your Pension Account – RSA: Yes, It is called Additional Voluntary Contributions (AVC). You are entitled to withdraw from your AVC any time before retirement (it is tax free if withdrawal is after 5 years). So if you’ve been putting some AVC in your retirement account or if you start now, you too can withdraw from that at any point before you retire.

12. Special Cases of Withdrawing from your RSA: There are special cases. For instance, if you retire before you’re 50 years old because of a mental or physical disability, your PFA will give you immediate access to your RSA. You can also claim 25% of your pensions if you lose your job and can’t get a new one within four months.

Pension Fund Administrators manage your pensions while you work; they invest the pensions for you safely and then update you regularly about how your money is doing to help you prepare well for retirement.
Opus magnum! I mean good work.
Permit me to make observations on notes 8 and 9.
8. Verification in the private sector:
* The employee must make sure he collects a letter of discharge from his employer.
* The employee must have copies of his 3 months pay slips ie months preceding to the month of retirement.
* Employee must contact his pension manager immediately on retirement to collect the forms to be completed and part of the forms for the court stamp duty. This will fasttack earlier completion of verification/ payment(s) as the case may be.

9. It has been observed that the pension managers does or generate three payment options based on age, sex and contribution closing balance but the pension manager will still chose for retirees. I think this area should be looked into by PENCOM.
i am not sure you are right as there are more than 5 grounds for withdrawal or payment.
I make specific reference to point No.9 and it is about the technically (computations based criteria of age, sex -post retirement life expectancy- and balance) about the amount to be paid to retirees per month subsequent to the payment of 25% lump sum.


@RemmyAlex can I make use of my pension fund before retirement i.e Is it possible to get this cash out if one has been out of job for a number of months?

Yes, @ese You can. Line 10 answers your question. The Pension Act, 2014 permits you to withdraw from your Account - RSA- provided you are out of employment for 4 months and are unable to secure another employment. You will be entitled to 25% of your total savings at that period. Then, you next, withdrawal till retirement age. I think there is also another clause for venturing into business and other important issues. Your PFA


I make specific reference to point No.9 and it is about the technically (computations based criteria of age, sex -post retirement life expectancy- and balance) about the amount to be paid to retirees per month subsequent to the payment of 25% lump sum.
Okay @kayode ajayi that was briefly captured in Line 7. Thanks for raising the point. It is more of a legal discussion. Just as you said, Pension should look into it. Thanks :)


please in a situation where a person who was released from service in a private company and such person has pension contributions with a pension fund administrator, is such a person entitled to any interest? also when and how can such person collect his/her pension. Thanks


There is need to know the criteria being used to calculate bag and baggage for retiring civil servants by their employee as they retire
What if an employee work for 3 years then decides to establish privately what happens to the contribution? Can it be released completely? Or if the person relocates out of the country finally and never coming back to work in Nigeria,what happens to his contributions over the past years?