An employee shall make monthly contributions of a minimum of 7.5% of the total of his/her monthly emoluments (i.e., monthly basic salary, transport allowance and housing allowance) into his RSA.
The employer shall contribute a minimum of 7.5% of the employee’s monthly emoluments towards the retirement benefits of the employee.
Pension contributions are paid directly to the PFC to be held on the order of the PFA.
A fully funded pension scheme exists where pension funds and assets match pension liabilities at any given time.
Every employee or contributor under the new pension scheme is expected to open RSA in his/her name with a PFA of his/her choice into which all his/her contributions and returns on investment are paid.
The RSA is similar to a bank account except that no contributor can withdraw money from the RSA before his/her retirement. The PFA is required to invest the money and issue statements of account at least once every quarter to the contributor.
Movement from one employment to another does not affect pension under the new scheme. The reform has removed the bottleneck associated with transfer of service from one organisation or sector to another, especially with regard to qualification for pension and the sharing formula for payment of pension as between employers.
The National Pension Commission is empowered by the Pension Reform Act 2004 to supervise and regulate new pension scheme.
This new pension scheme is contributory, fully funded, privately managed, third party custody of the funds and assets and based on individual accounts. It ensures that everyone who has worked receives his/her retirement benefits as and when due.
The new pension scheme covers all employees in the public service of the Federation, the Federal Capital Territory and the private sector of the economy.
The existing pensioners, employees who have 3 years or less to retire and the categories of persons covered by the provisions of section 291 of the Constitution of Federal Republic of Nigeria 1999 are exempted from the new pension scheme.
Any employee with more than 3 years to retire comes under the new pension scheme.
One of the main objectives of the pension reform is to ensure that every person that worked in either the public or private sector in Nigeria receives his/her retirement benefits as and when due.
Most of the old pension schemes were not fully funded. Therefore, upon retirement, there were no ready funds to pay the pensioners. The new pension scheme is fully funded. Money is contributed into individual employee’s Retirement Savings Account (RSA) and when he/she retires, there will be money in his/her RSA to pay his pension.