Pension Reforms Act 2014, A Summary

A Quick look into the Pension Reform Act amended 2014

By Razaq Ayeni


Pension Reform Act was first enacted in the year 2004 to see into the after work (retirement) experience of all employee both in the public sectors, private sectors and the Federal Capital Territory. This 2004 Pension Reform Act was repeal On 1 July 2014, President Goodluck Jonathan signed it into law the new Pension Reform Act 2014 which repealed the Pension Reform Act No. 2 of 2004 (repealed Act) like ten years after and it is to keep governing and regulating the administration of the uniform contributory pension scheme for all workers in all sphere of life and cedar. In this article, we will be looking into the reviewed or amended Pension Reform Act of 2014 which will be our guide. It contained fifteen parts and about one hundred and twenty-one pages.

The Pension fund was meant to be invested after it has been remitted by the employers. This investment will cut across specialist investment funds and other financial instruments as approved by the Commission. There are penalties for offences of misappropriation of funds, reimbursement or payment by a Pension Fund Administrator (PFA) or Pension Fund Custodian (PFC) to a staff, officer or director. In situations where the PFC fails to hold funds to the exclusive preserve of the PFA and PenCom or where it applies the funds to meet its own financial obligations, the Act will sanction such appropriately.

To start with is the objective of the Pension Reform Act as slated in the 2014 version. The Act recognizes the following as the objectives:

“(a)    establish a uniform set of rules, regulations, and standards for the administration and payments of retirement benefits for the Public Service of the Federation, the Public Service of the Federal Capital Territory, the Public Service of the State Governments, the Public Service of the Local Government Councils and the Private Sector;

(b)    make provision for the smooth operations of the Contributory Pension Scheme;

(c)    ensure that every person who worked in either the Public Service of the Federation, Federal Capital Territory, States, and Local Governments or the Private Sector receives his retirement benefits as and when due; and

(d)    assist improvident individuals by ensuring that they save in order to cater for their livelihood during old age.”

Furthermore, the Act talks about the set of people the provisions embedded in the Act applies to. The Act says:

“(1) The provisions of this Act shall apply to an employee in the Public Service Application. of the Federation, the Public Service of the Federal Capital Territory, the Public Service of the States, the Public Service of the Local Governments and the Private Sector.

(2)    In the case of the Private Sector, the Scheme shall apply to employees who are in the employment of an organization in which there are 15 or more employees.

(3)    Notwithstanding the provisions of subsection (2) of this section, employees of organizations with less than three employees as well as self-employed persons shall be entitled to participate under the scheme in accordance with guidelines issued by the Commission.”

The establishment of Contributory Pension Scheme was made compulsory for any employment in the Federal Republic of Nigeria, a Contributory Pension Scheme for payment of retirement benefits of employees to whom the Scheme applies under this Act.

The Scheme established shall apply to all employees in the Public Service of the Federation, the Federal Capital Territory, States, Local Governments and the Private Sector.

The contribution for any employee to which this Act applies shall be made in the following rates relating to his monthly emoluments or salary. It was stated in the Act that every employer should pay in a minimum of 10 per cent while such employer will deduct a minimum of 8 per cent from the employees’ monthly salary and pay the total of 18 per cent into the employee’s retirement saving account registered with any pension fund administrator of the employee choice.

The rates of contribution mentioned above may upon agreement between an employer and employee be revised upwards, from time to time and the Commission shall be notified of such revision. Any employee to whom this Act applies may in addition to the total contributions being made by him and his employer make voluntary contributions to his retirement savings account in a way to have huge and robust retirement savings when they stop working and have attained the age of 50 years.

The Act further said “Notwithstanding any of the provisions of this Act, an employer may agree –

(a)    on the payment of additional benefits to the employee upon retirement; or

(b)    elect to bear the full responsibility of the Scheme provided that in such a case, the employer’s contribution shall not be less than 20 percent of the monthly emoluments of the employee. In addition to the rates specified in subsection (1) of this section, 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 premium shall be paid not later than the date of commencement of the cover.”

In addition to the punishment ascribed in the 2004 Pension Reform Act, the 2014 Pension Reform Act made it clear 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. It later further said, “Subject to such guidelines as may be issued, from time to time by the Commission, the categories of persons covered under section 2(3) of this Act or persons exempted under section 5 of this Act shall be entitled to make voluntary contributions under the Scheme.”

Quoting directly from the Act, these set of people or employee are exempted from the provisions of the Pension Reform Act 2014 being examined.  “The categories of persons exempted from the Contributory Pension Scheme are –

(a)    the categories of persons mentioned in section 291 of the Constitution of the Federal Republic of Nigeria, 1999 (as amended) including members of the Armed Forces, the intelligence and secret services of the Federation;

(b)    any employee who is entitled to retirement benefits under any pension scheme existing before the 25th day of June 2004, being the commencement of the Pension Reform Act, 2004, but as at that date had 3 or fewer years to retire.”

Part three examines the retirement benefit. According to the Act, “A holder of 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 –

(a)    withdrawal of a lump sum from the total amount credited to his retirement savings account provided that the amount left after the Jump sum withdrawal shall be sufficient to procure a programmed fund withdrawals or annuity for life in accordance with extant guidelines issued by the Commission, from time to time;

(b)    programmed monthly or quarterly withdrawals calculated on the basis of an expected lifespan;

(c)    annuity for life purchased from a life insurance company licensed by the National Insurance Commission with monthly or quarterly payments in line with guidelines jointly issued by the Commission and National Insurance Commission;

(d)    professors covered by the Universities (Miscellaneous Provisions (Amendment) Act, 2012 shall be according to the University Act; or

(e)    other categories of employees entitled, by virtue of their terms and conditions of employment, to retire with full retirement benefits shall still apply.”

To further explore this Act, the Act made it clear that should in case any employee voluntarily retires, disengages or is disengaged from employment as provided for under this Act, the employee may with the approval of the Commission, withdraw an amount of money not exceeding 25 per cent of the total amount credited to his retirement savings account, provided that such withdrawals shall only be made after four months of such retirement or cessation of employment and the employee does not secure another employment.

In a case whereby the employee dies, his entitlements under the Life Insurance policy which refers to the death of an employee as maintained by the provision of this Act will be paid by an underwriter to the name written down by the deceased as his or her beneficiary as recognized by section fifty seven of the Insurance Act. Upon receipt of a valid Will admitted to Probate or a letter of administration confirming the beneficiaries under the estate of the deceased employee, the pension fund administrator shall, with the approval of the Commission, release the amount standing in the retirement savings account of the deceased to the personal representative of the deceased or to any other person as may be directed by a court of competent jurisdiction, in accordance with the terms of the Will or the personal law of the deceased employee, as the case may be.

Another important aspect of this Act has to do with retirement savings account and remittance of contributions. It is mandatory for every employee to who the Act applies to open and maintain a retirement savings account in his or her name with any pension fund administrator of his or her choice. Such employee will have to let his or her employer know the pension fund administrator he or she has chosen and tendered the number so that the employer will start to remit the percentage discussed earlier into the account. The employer is empowered by this Act to deduct at source the monthly contribution of the employee and not later than seven working days from the day the employee is paid his salary, remit an amount comprising the employee’s contribution as discussed above including the employer’s contribution to the Pension Fund Custodian specified by the Pension Fund Administrator of the employee.

In a situation where an employee fails to open such Retirement Savings Account within a period of six months after assumption of duty, this Act empowers the employer to open or request a Pension Fund Administrator to open a nominal retirement savings account for such employee for the remittance of his or her pension contributions but this is subject to the guideline laid down by the commission.

Section 11 subsections 3(b) that “the employer shall not later than 7 working days from the day the employee is paid his salary remit an amount comprising the employee’s. An employer who fails to deduct or remit the contributions within the time stipulated as written in this Act shall in addition to making the remittance already due, be liable to a penalty to be stipulated by the Commission. The penalty referred to shall not be less than 2 percent of the total contribution that remains unpaid for each month or part of each month the default continues and the amount of the penalty shall be recoverable as a debt owed to the employee’s retirement savings account, as the case may be. An employee shall not have access to his retirement savings account or have any dealings with the Pension Fund Custodian with respect to the retirement savings account except through the Pension Fund Administrator. As non-remittance of the contributions as and when due attracts penalty to be stipulated by the commission as enshrined in Section 11(6) &(7) and Section 24(d) of the PRA 2014. The penalty shall not be less than 2% of the unpaid contribution and is recoverable as a debt.


The provision of this Act made it possible to change or transfer employee retirement account from one Pension Fund Administrator to another but provided that such development is in line with the guidelines issued by the commission and such employee cannot transfer or change the Pension Fund Administration more than once in a year. In the case of an employee changing from one employer or employment to another, he or she will still maintain the same retirement savings account or be transferred but obeying the provision of this Act discussed above.

I will like to also bring to your notice that the federal government was equally making payment of 5% of its monthly wage bill into the Retirement Benefits Bond Redemption Fund Account for the payment of the accrued pension rights of its employees who had worked under the old Defined Benefits Scheme and transited to the CPS. The commission has the power to investigate and audit any employer who has not been complying dearly with every provision of this Act and this is enshrined in Section 92(2) of the PRA 2014 “empowers the commission to inspect, investigate or examine an employer or anybody relating to pension funds and assets.”


Qeeva Advisory is a Pension Compliance Consulting Firm helping Employers Comply with the extant Act. Further information can be obtained, Please call 08023200801,

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