10 things to know about Contributory Pension Scheme

Nigeria’s Contributory Pension Scheme introduced by the Pension Reform Act is an arrangement where both the employer and the employee contribute a portion of an employee’s monthly emolument for the employee’s retirement.

Here are 10 facts about the CPS

1. Employees in the public and private sectors, as well as self-employed persons can open Retirement Savings Accounts with Pension Fund Administrators.

2 The minimum rate of contribution into the RSA for public and private sectors is 18 per cent of the employee’s monthly emolument comprising of the employer’s 10 per cent, and eight per cent of the employee’s contribution.

3. Self-employed workers can open RSAs under the Micro Pension Plan, make regular contributions and also withdrawals based on specific guidelines.

4. PFAs invest RSAs of contributors to earn return on investment. Income generated from investing pension contributions is distributed into the RSAs of contributors based on the proportion of the assets in the individual RSAs.

5. The retiree is entitled to a lump sum payment out of the balance in the RSA at retirement, after that, the monthly payment starts.


6. At retirement stage, the modes of getting monthly stipends are either through the Programmed Withdrawal or Life Annuity. PW is paid to the retiree by the PFAs while LA is paid by the life insurance companies.

7. A contributor will start collecting monthly stipends upon attaining the age of 50 years and no longer in paid employment, or is medically incapacitated.

8. Where an employee voluntarily retires, disengages or is disengaged while still under 50 years , the contributor can have access to 25 per cent of his RSA, provided that such employee is unable to secure another employment after four months of such retirement or disengagement.

9. Where an employee who has been contributing under the CPS dies before retirement, his benefits will be paid to the named beneficiary as provided under a Will, or to the next of-kin. In the absence of such designation, the benefit will be paid to any person appointed by the probate registry as the administrator of the estate of the deceased.

10. Most important thing is that, the CPS ensures that you have regularly monthly stipends in your vulnerable old age.