FREQUENTLY ASKED QUESTIONS
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 Consequently, it was repealed and re-enacted in July, 2014 as the Pension Reform Act of 2014.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?
Who is Exempted from the CPS?
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)?
What is the Difference Between a PFA and a PFC?
How is the Contributory Pension Scheme (CPS) Different from the Old Defined Benefits Pension Scheme (DB)?
Does the PRA 2014 Apply to Foreigners Employed in Nigeria?
Does the PRA 2014 Apply to Nigerians Working in Nigerian Missions Abroad?
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?
Can Self-Employed Persons Participate in the Scheme?
Where an Organisation has an Approved Existing Scheme (AES), is it Mandatory for All Employees to Join the Existing Scheme?
Can an Employee Have Two Accounts in Two or More Different PFAs?
What are the Implications of Multiple Registration?
What Happens if a PFA Fails or is Liquidated?
Who Can I Complain to if I have a Problem with my PFA?
What is the Minimum Period Required by an Employee to Qualify for Pension Under the New Scheme?
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?
- Evidence of remittance of monthly pension contribution(s) to the RSAs of employees which should include: 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.
- Evidence of remittance of pension contributions from inception to date in form of photocopies of bank deposit slips and payment instruments.
- Evidence of transfer of assets meant for any pre-2004 retirement benefits scheme into the employee’s RSA.
- Evidence of valid Group Life Insurance policy which should include 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?
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 Investment and Securities Tribunal established under the Investment and Securities Act 1999.
What Should Be Done When Pension Deductions are not Remitted by Employers?
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)
What is a Retirement Savings Account (RSA)?
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 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)?
What is the Role of the National Pension Commission (PenCom)?
What Does “fully funded” Pension Scheme Mean?
A fully funded pension scheme exists where pension funds and assets match pension liabilities at any given time. This means there is an assurance of funds availability to settle pension obligations at any given time.
Does the PRA 2014 Apply to Nigerians Working Abroad?
The PRA 2014 is applicable to Nigerian citizens working in Nigeria. However, the Commission has issued Guidelines for Cross-Border Arrangements in order to encourage Nigerians working abroad to participate in the scheme on a voluntary basis.
Does the PRA 2014 Apply to Nigerians Returning from Foreign Employment?
Can Employees on Temporary, Contract or Tenured Appointments Join the Contributory Pension Scheme?
How Does Movement from One Employment to Another Affect Pension Contribution?
Where a Company has a Closed Pension Fund Administrator (CPFA), is it Mandatory for all Employees to Join the Existing Scheme?
What is Multiple Registration?
How Can I Be Sure that My Contributions Are Safe?
What Happens Where a PFC Fails or is Liquidated?
How is Compulsory or Voluntary Retirement Handled Under the CPS, xif this Happens Before the Age of 50 Years?
Will Gratuity be Paid Under the CPS?
What is the Retirement Age Under the Pension Reform Act 2014?
Can Companies with Less than 3 Employees Get Certificates of Compliance?
What Happens to a Non-Compliant Employer that Fails to Make Deductions as Stipulated by the PRA 2014?
What Remedy is Available to an Employee or Beneficiary of an RSA Who is Dissatisfied with a Decision of the PFA or PFC?
Contribution
When Does the Deduction of Pension Contributions of a New Employee Commence?
What is Annual Total Emolument (ATE)?
What Are the Rates of Monthly Pension Contribution Under the CPS?
Can the Employer Make the Total Contributions on Behalf of the Employee?
An employer may choose to pay the whole contributions on behalf of the employee without making any deductions from the employee’s salary. In this case, such contributions by the employer shall not be less than 18% of the monthly emoluments of the employee.
What Happens When There is Difference between What is on the RSA Statement Sent to an Employee by his PFA and What is Actually Being Deducted by his Employer?
Where there is a difference, the employee should approach his PFA and employer for reconciliation. Where it is established that there is an under payment of the monthly contributions, the employer must remit the difference into the RSA of the employee.
How Are Monthly Deductions of Contribution Handled When One is Either a Contract or Casual Staff Whose Salary is Not Broken Down into Basic, Transport and Housing Allowances?
What Comprises an Employee’s Monthly Emoluments?
Who Receives the Monthly Pension Contributions Remitted by the Employer on Behalf of Employees?
Can an Employer Contribute More than the Stipulated 10% Minimum Pension Contribution?
Section 4(4) of the PRA 2014 stipulates that an employer may, notwithstanding any of the provisions of the Act, agree on payment of additional benefits to the employee upon retirement or elect to bear the full responsibility of the scheme provided the total amount contributed by the employer should not be less than 18% of the employee’s monthly emoluments.
What Happens When an Employer Fails to Remit its Employees’ Pension Contributions Within 7 Working Days After the Payment of Salaries?
Such employer shall in addition to making the remittance already due, be liable to a penalty to be stipulated by the Commission, which will be paid to the employees, provided that the penalty shall not be less than 2% of the total contribution that remains unpaid for each month while the default continues.
Can an Employer Pay for More than the Three Times the Total Annual Emolument of the Employee?
Public Sector
How Does the Federal Government Remits the Pension Contributions of its Employees into their RSAs?
What Happens to an Employee of a Treasury-Funded MDA whose Pension Contribution is not Being Remitted to the RSA?
Such an employee should write a complaint to his PFA. He may also inform the Pension Desk Officer (PDO) and provide all necessary documents, as maybe advised by the PFA, for onward delivery to the Commission. The documents will be verified and the necessary remittance of his/her accumulated contributions would be made in all verified cases.
What Happens to the Accumulated Pension Contributions of FGN Employees Prior to Remittance into their RSAs?
What is Retirement Bond?
What are the Components of the Final RSA Balance of a Treasury-Funded FGN Employee?
What Happens to the Accrued Pension Benefits of Employees Who Were Hitherto in the Services of States and Local Governments, but Later Transferred Their Services to the Federal Government After the Commencement of the CPS?
Consequently, employees who transferred their services after the enactment of the PRA 2004 have the responsibility to arrange with their previous employers to pay their retirement benefits for the periods they worked for the previous employers.
What Happens to My Pension if I Retired Prior to the Introduction of the Contributory Pension Scheme in June 2004?
What Happens to the Monies Deducted at Source from Salaries of FGN Employees Who Were Exempted from the New Scheme?
Who Provides the Group Life Insurance for the Employees of Treasury Funded Federal Government Employees?
Investment, Fees & Services
Can an Organization Own Controlling Shares in Both a PFA and a PFC?
Can Pension Funds be Attached for the Execution of a PFC’s Judgment Debt?
Can Government Borrow from the Pension Contributions of Workers?
Can PFAs Invest in Instruments that are not Allowed by the PRA 2014 and Guidelines on Investments Issued by the Commission?
No. PFAs are only allowed to invest in instruments in line with the PRA 2014 and Regulations on Investment of Pension Funds. In addition, PFAs are closely monitored, on daily basis, to ensure that they adhere strictly to the Regulations.
What is the Rate of Return on Investment of Pension Fund Assets?
How are the PFAs and PFCs paid for their services?
Can the Funds in an Employee’s RSA Be Used as a Collateral for Loan by the RSA Holder?
What is the Mode of Investment of Pension Fund in Infrastructure in Nigeria?
Can a PFA Keep Pension Fund Assets with a PFC in Which the PFA has Shares?
Is a PFA Allowed to Invest Pension Fund Assets in its Own Shares?
What Are Allowable Investment Vehicles?
The PRA 2014 and the Regulation on Investment of Pension Fund Assets issued by the Commission clearly stipulate the allowable financial instruments in which pension fund assets can be invested. The instruments allowed are: Equities; Federal Government Securities; State/Local Government Bonds; Corporate Debt Securities; Money Market Instruments; Open/Closed-end Funds; Infrastructure Bonds & Funds; Private Equity Funds and any securities/instruments that may be approved by the Commission, from time to time.
Can I Give My PFA instructions on How to Invest My Funds?
How are Profits Distributed to RSA Holders?
What are the Safeguards Put in Place to Protect Pension Funds from the Negative Impact of Adverse Investment Conditions?
Can a Contributor Use Part of the RSA Balance to Secure a Mortgage?
Benefits & Withdrawal
What Happens When an Employee Who Has Been Contributing Under CPS Dies Before His Retirement?
What Happens When an FGN Employee Receives Promotion After Enrolment Exercise?
What Happens to the Balance in the RSA After Any Initial Lump Sum Withdrawal?
What is Programmed Withdrawal?
What Happens to a Retiree with an Insufficient Balance in his RSA?
What are the Reasons for Monthly Pension and Lumpsum to Differ Between Colleagues Who Retired at the Same Time and on the Same Salary Grade?
Monthly pension and lumpsum may differ due to the following reasons:
- their grades, ranks, salary steps may differ as at June 2004;
- the magnitude of their contributions to RSA may vary during their pension accumulation phases;
- their respective PFAs may operate different strategies for the investment of pension fund and generate different investment incomes; and
- they may at retirement, withdraw different amounts as lumpsum giving higher monthly pension to the one who withdrew lower amount as lumpsum due to higher RSA balance after the lumpsum withdrawal.
What is the Procedure for Accessing the RSA of a Deceased Employee?
What Happens to the Benefits of a Missing Employee?
Who Pays the Premium for a Group Life Insurance Policy?
Can I Choose Programmed Withdrawal and Later Change to Annuity When I Have Already Retired?
How Long Does it take to Obtain Approval for Payment of Benefits?
What Happens to an Employee Who Retired Under the CPS Due to Physical or Mental Incapacity, but Subsequently Had His Case Reviewed and Recertified Fit and Proper for Employment?
The new employer would commence remittance of the employee’s pension contributions into his original RSA.
When Can I Have Access to the Money in My RSA?
Can I Make a Lump Sum Withdrawal of More than 25% of My RSA Balance at Retirement?
What is Annuity?
How Would a Person Who Retires Before the Age of 50 Years and in Accordance with the Terms and Conditions of His Employment Access his RSA?
What Constitutes the Consolidated Benefits of a Deceased Employee Who Died in Active Service?
How Would the Consolidated Benefits of an Employee Who Died Prior to Opening an RSA be Processed in Favour of His Beneficiaries?
What is the Quantum of an Employee’s Benefits Under the Life Insurance Policy?
Section 4(5) of the PRA 2014 makes it mandatory upon every employer to maintain a life insurance policy in favour of its employees for at least 3 times the annual total emolument of the employees. The employer is still obligated to pay the equivalent amount of the Group Life insurance to the deceased beneficiaries in the event that it does not have a current Policy with an Insurance Company.