Pension Scheme Calculations In Nigeria, Your Employer Obligations

The significance of your pension funds for retirement and old age cannot be overstated. Many employees may underestimate the importance of monthly pension remittances, but this reflects a lack of awareness about employer obligations and retirement planning. It’s crucial to understand that failure to remit these funds into your Retirement Savings Account (RSA) is not just a minor issue—it is actually a criminal offense.

Legal Framework

The Pension Act 2014, effective from July 1, 2014, was established to govern and regulate pension funds. The 2014 Pension Reform Act (PRA) has since been introduced to refine and improve this framework.

Employer Obligations

Your employer is legally bound to:

• Pay Contributions Monthly: A percentage of your salary must be remitted to your RSA every month.
• Ensure Prompt Payment: Payments must be made in a timely manner.
• Avoid Cash Payments: Pension funds must not be paid in cash.
• Freedom of Pension Manager: You are not required to use your company’s pension manager.

Pension Contribution Breakdown

1. Contribution Rate: The total contribution rate is 18%:

   • Employer's Contribution: 10%
   • Employee's Contribution: 8% This means 8% of your salary is deducted for your RSA, while your employer contributes 10%.

2. Minimum Participation Threshold: Mandatory pension participation applies to companies with a minimum of three employees, not fifteen as previously stated.

3. Contribution Specifics: Regardless of the employer's contribution, the total rate remains 18%. Employees are responsible for contributing 8% of their salary.

Compliance and Penalties

PENCOM (Pension Commission) enforces compliance with these regulations. If an employer fails to remit contributions:

• Penalty for Non-Remittance: A fine of 2% of the withheld amount is imposed for every 14 days it remains unpaid.
• Additional Fine: PENCOM also charges a fine of 1% of the same amount.

Reporting Non-Compliance

If your employer is not meeting their pension obligations:

• Contact PENCOM: Email info@Pencom.gov.ng or visit their office at 88A Oduduwa Crescent, Ikeja, Lagos. Ensure you have your RSA statements, contract letter, payslips, or other proof of under-remittance.
• Report Line: Call 0700-CALL-PENCOM (0700-2255-736266) for assistance.

For further details, you can also visit PENCOM Nigeria.

Please feel free to ask any questions for further clarification in the comments section.