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.
The new pension scheme is mandatory for all categories of employers and employees covered under the Pension Reform Act.
There is no merger of private sector pension with that of the public sector pension since the sources of funding are not the same. However, both are now being regulated under the same rules and regulations.
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.
Private sector pension schemes will be allowed to continue provided if there is evidence to show that the pension scheme is fully funded at all times, any shortfall made up within 90 days, pension funds assets are segregated from the assets of the employer/company, the pension funds assets are held by a licensed Custodian and the scheme is specifically approved by the National Pension Commission.
An employee shall make monthly contributions of a minimum of 8% 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 10% of the employee's monthly emoluments towards the retirement benefits of the employee.
An employer can make all the contributions on behalf of the employee without making any deduction from the employee’s salary except that such contribution by the employer shall not be less than 18% of the monthly emoluments of the employee.
Your contributions are just savings out of your emoluments towards your old age and the employer’s contribution will only increase such savings.
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 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 organization or sector to another, especially with regard to qualification for pension and the sharing formula for payment of pension as between employers. Whenever an employer changes jobs he/she will be expected to provide his/her RSA information to the new employer.