Pensions play a crucial role in ensuring financial security and stability for individuals after their retirement. In Nigeria, the pension system has undergone significant reforms in recent years to enhance its efficiency and effectiveness. However, many Nigerians still have questions about the pension system and how it works. In this article, we’ll address 15 frequently asked questions about pension in Nigeria.

1. What is a pension?
A pension is a regular payment made to individuals who have retired from active employment. It serves as a financial safety net to support individuals during their retirement years.

2. Is pension mandatory in Nigeria?
Yes, pension contributions are mandatory for employees in the formal sector. The Pension Reform Act of 2014 made it compulsory for employers to contribute a percentage of their employees’ salaries to a pension fund.

3. What is the Pension Reform Act (PRA) 2014?
The Pension Reform Act of 2014 is a landmark legislation that revamped the Nigerian pension system. It established the Contributory Pension Scheme (CPS), which mandates both employers and employees to contribute to a pension fund.

4. How does the Contributory Pension Scheme work?
Under the CPS, a percentage of an employee’s salary is contributed to a pension fund account managed by a Pension Fund Administrator (PFA). The employer also contributes a matching amount. These funds are invested and grow over time, providing retirement income.

5. What happens to the pension funds contributed?
The pension funds are managed and invested by PFAs in accordance with regulations set by the National Pension Commission (PenCom). The goal is to generate returns and ensure the growth of the fund.

6. Can self-employed individuals participate in the pension scheme?
Yes, self-employed individuals can voluntarily participate in the pension scheme by opening a Retirement Savings Account (RSA) with a PFA and making regular contributions.

7. When can I access my pension benefits?
You can access your pension benefits upon reaching the age of 50 and having made contributions for a minimum of 10 years. Alternatively, you can access your benefits at the age of 60, regardless of years of service.

8. Can I withdraw my pension contributions before retirement?
Under certain conditions, you can make partial withdrawals from your RSA before retirement, such as for medical treatment, mortgage payments, or education.

9. What happens to my pension if I change jobs?
Your pension contributions and benefits are portable. They will be transferred to your new RSA with your new employer, ensuring that your retirement savings continue to grow.

10. Can pension funds be inherited?
Yes, pension funds can be inherited by your nominated beneficiaries in the event of your death. The funds will provide financial support to your loved ones.

11. What is the role of the National Pension Commission (PenCom)?
PenCom is the regulatory body responsible for overseeing and regulating pension matters in Nigeria. It ensures compliance with pension laws and safeguards the interests of pension contributors.

12. How do I choose a Pension Fund Administrator (PFA)?
You can choose a PFA based on factors such as their track record of investment performance, customer service, and reputation in the industry.

13. Can the government access pension funds?
Pension funds are held separately from government accounts and cannot be accessed by the government. The funds are safeguarded to ensure retirees’ financial security.

14. Are pension funds protected from inflation?
While pension funds are invested to generate returns, they are not completely immune to inflation. However, PFAs aims to invest wisely to mitigate the impact of inflation.

15. What is the future of pensions in Nigeria?
The Nigerian pension system is continually evolving, with ongoing efforts to enhance transparency, accountability, and efficiency. Reforms are expected to align the system with global best practices, providing retirees with a more secure financial future.

In conclusion, understanding the pension system is essential for every Nigerian worker to secure a stable financial future after retirement. The Contributory Pension Scheme, established under the Pension Reform Act of 2014, has brought significant changes to the landscape of pension management in Nigeria. By being informed and making prudent choices, individuals can navigate the pension system with confidence and enjoy a comfortable retirement.