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<\/p>\nIn order to ensure that every retiree is financially independent at retirement, the Pension Reform Act 2014 reviewed upwards, the minimum rate of pension contribution from 15 percent to 18 percent of monthly emolument which is monthly basic salary, transport allowance and housing allowance. Under the Pension Reform Act 2014, 8 percent will be contributed by the employee and 10 percent by the employer.<\/p>\n
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Up until the year 2000, the combined pension contribution rate was 7.5% and was subject to a maximum limit of N3, 600 per annum. In 2001, the contribution rate was increased to 10% and subject to a maximum contribution of N52, 800 per annum. This was until 2004 where with the introduction of the Pension Reform Act, it was required that a combined rate of 15% was to be contributed to an employee\u2019s pension account without any limit as to amount.<\/p>\n
Under the Pension Reform Act 2014 which sought to repeal the Pension Reform Act 2004 (as amended), all employees to whom the scheme applies are to open a Retirement Savings Account with a Pension Fund Administrator (PFA) of their choice. The contributory pension scheme under the Pension Reform Act, 2014 is for all employees in the public service of the Federation, Federal Capital Territory, and the private sector with a minimum of three employees.<\/p>\n
The Contributory Pension Scheme requires pension funds are to be privately managed exclusively by licensed Pension Fund Administrators (PFA). The main functions of the Pension Fund Administrators are to:<\/p>\n
The current pension scheme is applicable to employers with 3 or more employees. Under the previous Pension act (Pension Reform Act 2004), only employers with a minimum of 5 employers were required. Under the Pension Reform Act 2014, the total rate of contribution increased from 15% of monthly emolument (being 7.5% each by the employer and the employee) to 18% with a minimum of 10% by the employer and a minimum of 8% by the employee.<\/p>\n
The Reform Act also changed the base upon which the monthly contribution is calculated. This is known as total emoluments which shall not be less than a total sum of basic salary, housing allowance and transport allowance (BHT) as may be defined in the employee\u2019s contract of employment.<\/p>\n
According to Nigeria Pension Commission, employees are required to contribute a minimum of 8% of the sum of his basic salary, housing allowance, and transport allowance. The employer, however, is required to contribute a minimum of 10% of the same sum.<\/p>\n
The amount contributed by the employee (8% of BHT) is also tax exempted (tax will not be deducted on it). When calculating the 8% required to be paid by the worker, you only need to take into account your Basic + Housing + Transport (BHT) allowance and not the whole month’s salary. This is also the same for the employer who pays a minimum of 10% of the same sum. This means that at the end of each month, at least 18% (your 8% and employer\u2019s 10%) will go to your Retirement Savings Account.<\/p>\n
So when calculating the salary of a Nigerian worker, with a basic salary of N50, 000, transport allowance of N30, 000 and housing allowance of N20, 000. The contribution of this worker is 8% of (N50000 + N30, 000 + N20, 000) which is 8% of N100, 000 equals to NN8, 000<\/p>\n
The employer of this worker then contributes 10% of N100, 000 which is N10, 000<\/p>\n
This worker\u2019s pension contribution per month is N18, 000<\/p>\n
The pension contribution scheme exists so that every Nigerian worker is guaranteed to receive the pension they deserve upon retirement. The Pension Contribution Scheme is regulated by the Pension Commission and thus designed in such a way that your employer has no say in how your pension should be invested and paid to you.<\/p>\n
Many people want to know if they can contribute more than the required 8% to their pension fund. This is very possible. A worker can contribute more than just 8%, and an employer can also contribute the whole 18% for the worker.<\/p>\n
If a worker also has a huge amount of money he or she wants to drop into the account at once, s(he) is free to do so. Voluntary contributions such as this however are taxable upon withdrawal if the withdrawal is made less than five years after the contribution was made.<\/p>\n
When a worker reaches the age of 50, you can decide how the money is paid to you. Below are a few options available to you:<\/p>\n
A worker can be paid 25% of the money from his or her retirement savings account if he or she was fired or lost job. However, this is after six months has passed and the worker is still unable to find another job. After six months, the worker gets 25%, after which he or she cannot access the rest until retirement age.<\/p>\n
Other valid grounds for withdrawal from the pension savings account before one is 50 includes:<\/p>\n
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In order to ensure that every retiree is financially independent at retirement, the Pension Reform Act 2014 reviewed upwards, the … <\/p>\n