Contributors’ right amid rising pension assets


Since the inception of the Contributory Pension Scheme (CPS), there have been consistent efforts by the regulator and operators to enlighten contributors on the workings of the scheme and also expose them to their rights and obligations as they differ from the rested Defined Benefit Scheme. Sunday Ojeme reports


No doubt, pension assets under the Contributory Pension Scheme (CPS) remains one of the fastest investment portfolios in the country.


 As at today, the assets have moved steadily without a trace of blemish from a few million naira at inception to precisely N9.08 trillion as at last year. Although some controversies had trailed it in the past, investigations on this revealed that all the dust raised was merely due to an initial misunderstanding of the scheme by contributors.

 Considering the failure of the now rested government funded Defined Benefit Scheme (DBS), which placed so many pensioners in agony, some contributors to the CPS, due to shallow knowledge of its workings got agitated over their investment in the scheme, and subsequently resorted to approaching their Pension Fund Administrators (PFAs) to either demand for some explanations or requested that their contributions be withdrawn and given to them.

However, over the last few years, the knowledge of the scheme and how it differs from the old order have drastically cut down on the rate of agitations by some contributors. This has invariably imbued more confidence in the public over the ability of the fund managers to be in charge of the contributions.

 In the light of the above, experts still believe in the need to alert contributors about their rights as far as the CPS is concerned.


According to an expert and pension rights advocate, Barrister Ivor Takor, The Act confers on workers certain legal rights, as Section 3 of the Act, prescribes establishing a Contributory Pension Scheme for all employees of public services of the federation, the Federal Capital Territory, states, local government and the private sector.

  In the same vein, the worker is also entitled to the employer’s contribution towards his pension while Section 4(1) of the Act provides that the rate of contribution to the scheme shall be a minimum of 10 per cent of monthly total emolument of the employee by the employer, while the employee shall contribute a minimum of eight per cent.

Takor, who is the Director, Centre for Pension Right Advocasy, also recalled  Section 4(5) of the Act, which provides that in addition to the rates of contributions, every employer shall maintain a Group Life Insurance Policy in favour of each employee for a minimum of three times the annual total emolument of the employee and that premium shall be paid not later than the date of commencement of the cover.

“For the enforcement of this right, the Act in Section 4(6) provides that where the employer failed, refused or omitted to make payment as and when due, the employer shall make arrangement to effect the payment of claims arising from the death of any staff in its employment during such period.

 “The right to determine how to access retirement benefits under the Act. Section 7(1) provides that a holder of a retirement savings account shall, upon retirement or attaining the age of 50 years, whichever is later, utilize the amount credited to his retirement savings account for the following benefits: withdraw a lump sum from the total amount credited to his retirement savings account provided that the amount left after the lump sum withdrawals shall be sufficient to procure a programmed monthly or quarterly withdrawals calculated on the basis of an expected life span or annuity for life purchased from a life insurance company licensed by the National Insurance Commission with monthly or quarterly payment. The decision to access benefits either through programmed withdrawal or annuity is the sole right of the employee.


“The right to contributions to the scheme form part of tax deductible expenses in computation of tax payment as well as retirement benefits being exempted from taxation. Section 10 of the Act provides that notwithstanding the provisions of any other law, contributions to the Scheme under the Act shall form part of tax deductible expenses in the computation of tax payable by an employer and employee under the relevant Income Tax Law; moreover, all interests, dividends, profits, investment and other income accruable to pension funds and assets under the Act, as well as any amount payable as a retirement benefit under this Act shall not be taxable.

 “The other right, is the right to choose a Pension Fund Administrator (PFA). Section 11(2) provides that an employee to whom the Act applies shall notify his employer of the Pension Fund Administrator chosen by him. This means that the worker, has the sole right to choose a PFA, with no interference by the employer.

  “The worker has a right to timely remittance of contributions into his/her retirement savings account (RSA). Section 11(3)(b) of the Act provides that not later than 7 working days from the day the employee is paid his salary, remit an amount comprising the employee’s and employer’s contributions to the Pension Fund Custodian (PFC) specified by the Pension Fund Administrator of the employee. As penalty for non compliance, Section 11(6) provides that an employer who fails to deduct or remit the contributions within the stipulated time frame, shall in addition to making the remittance already due, be liable to a penalty to be stipulated by the National Pension Commission (PenCom),” he noted.

Transfer window

 In a situation where the contributor is not satisfied with the services of his PFA, Section 13 of the Act confers on the worker the right to transfer his/her RSA from one PFA to another.

 The pension expert, however, pointed out that this section provides that subject to the guidelines issued by the Commission, a holder of a retirement savings account maintained under the Act may not more than once in a year, transfer his account from one Pension Fund Administrator to another.

 According to him, “there is also the right to transfer an RSA from one employer to another. Section 14 of the Act provides that where an employee transfers his employment from one employer or Organisation to another, the same retirement savings account shall continue to be maintained by the employee or be transferred.

 “Section 15 protects pension rights of employees in the Public Service of the Federation and the Federal Capital Territory accrued under the defined Benefits Scheme. The section provides that as from June 25, 2004, being the commencement of the Pension Reform Act 2004, the accrued pension right to retirement benefits of any employee in the Public Service of the Federation and the Federal Capital Territory who is already under any pension scheme existing before the commencement of that Act and has over 3 years to retire shall be recognized in the form of amount acknowledged through the issuance of Federal Government Retirement Benefits Bonds by the Debt Management Office, which shall be redeemed upon retirement of the employee.

Right to information

“The Act grants a worker, the right to regular information. Section 55 provides among other duties of the Pension Fund Administrator, the duty to provide regular information on investment strategy, market returns and other performance indicators to employees or beneficiaries of the retirement savings account. The PFA shall also provide customer service support to employee including access to employee account balances and statements on demand.

“One of the new rights granted the worker after the commencement of the Contributory Pension Scheme is the right to apply a percentage of the pension assets in the RSA for residential mortgage. Section 89(2) of the Act provides that a Pension Fund Administrator May, subject to guidelines issued by the Commission, apply a percentage of the pension assets in the retirement savings account towards the payment of equity contribution for payment of residential mortgage by a holder of Retirement Savings Account.”

 He, however, noted that each of these rights carried regimes of sanctions ranging from letters of advice, caution, warning, monetary sanctions, naming and shaming and litigation for violations and non-compliance by either the employer or the Pension Fund Administrator since the rights are derived from a duty imposed on them by provisions in the Act.

Last line

As the scheme gradually expands both in consolidation, acceptance and growth, what is of utmost importance is for the regulator to keep the awareness campaign going as it has always done especially whenever new policies are introduced just like the case of the multi-fund structure initiative.

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