Contributory Pension Scheme: The Nigerian Pension system operates on a Contributory Pension Scheme, which means that both employers and employees contribute to the pension fund. The contributions are based on a percentage of the employee’s salary, and the employer is responsible for deducting the employee’s contribution and remitting it to the pension fund.
Pension Fund Administrators: The Pension Reform Act established Pension Fund Administrators (PFAs) to manage the pension fund. There are currently over 20 licensed PFAs in Nigeria, and they are regulated by the National Pension Commission (PenCom).
Retirement Age: The normal retirement age in Nigeria is 60 years for public sector employees and 65 years for private sector employees. However, retirees can choose to retire earlier or later than the prescribed retirement age.
Pension Types: There are two types of pension in Nigeria: Defined Benefit Scheme and Defined Contribution Scheme. The Defined Benefit Scheme is an old pension system where retirees receive a fixed amount based on their salary and years of service. The Defined Contribution Scheme is the current system, where retirees receive a pension based on the contributions made to the pension fund.
Pension Withdrawal: Retirees can withdraw their pension in two ways: lump sum payment and annuity. A lump sum payment is a one-time payment of a percentage of the pension fund, while an annuity is a regular payment for life.
As an employee, it is essential to understand the pension system, contribute to the pension fund, and plan for retirement. As a retiree, it is essential to choose the right pension option and manage the pension fund wisely to ensure financial security during retirement.