CPS is a contributory, fully funded, privately managed pension scheme that is based on individual accounts. It ensures that everyone who has contributed receives his benefits upon retirement as and when due.
It means that the pension plan has sufficient assets to fund all pension liabilities.
The PRA 2014 states that an employee should contribute a minimum of 8% of his monthly emoluments while the employer should contribute a minimum of 10% of same towards the retirement benefits of the employee.
A minimum of 8% of total of your monthly basic salary, housing and transport allowances.
A minimum of 10% of the employee's total monthly basic salary, housing and transport allowances.
No. You only succeeded in saving part of your salary towards your retirement benefits.
The total contribution will be paid out by the employer directly to a Pension Fund Custodian and will be managed by the Pension Fund Administrator of the employee’s choice.
Cash Cheque, POS, E-payment, Transfers etc.
These are additional contributions eligible employees can remit to their Retirement Savings Accounts (RSAs) through their employers as allowed by the PRA 2014.
No. It has to be paid through your employer.
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A PFA is an entity licensed by the National Pension Commission (PenCom) and charged with the responsibility of managing the pension funds. Each contributor is at liberty to choose a PFA of his/her choice.
A PFC is an entity licensed by the National Pension Commission (PenCom) to collect pension contributions, settle investment trades, hold pension assets in safe custody and pay pension benefits on the advice of the PFAs and the PenCom.
This is a pension scheme being managed by the employers with the total pension assets with N500m and above that have obtained approval from the National Pension Commission to this effect. This enables them operate/manage its funds independently.
Yes, you can still maintain the scheme but it will have to be managed by a PFA.
The PFA manages the pension funds through various investments in accordance with the investment guidelines by the PenCom while the PFC is the custodian of the pension funds assets and acts to the order of the PFA in line with regulations.
No. The employer sends his contribution as well as the employee’s contribution directly to the PFC.
This is similar to a bank account. Every contributor will open a Retirement Savings Account (RSA) with a PFA of his choice and remitted contributors' contributions through the employers are subsequently credited to individual RSA accounts on a regular basis. The PFA will be required to issue a statement of account at least once every quarter.
Yes, this can be done through the transfer window which can not be more than once a year.
Your savings will not be affected as custody of your funds resides with the PFC. In addition, Pension Funds are invested in a diversified portfolio of investments including Government Securities, Stocks and Real Estate in line with the PenCom's Investment Guideline.
Nothing happens. The account number remains with you for life. You simply notify your new employer of your PFA and thereafter your contributions will continue to be remitted to your RSA account through its PFC.
It covers employees in the private sector who are in employment in an organisation in which there are three or more employees and the public sector.
The old scheme is a Defined Pension Benefit which places the whole responsibility for the payment of the staff retirement benefit solely on the employer while the Contributory Pension Scheme is jointly funded by the employee and the employer.
Lumpsum payment will be paid to the contributors after retirement and subsequently monthly pension payments are guaranteed.
The function of fund administration and custody of pension funds are segregated. Also, all custodians are subsidiaries of major banks that guarantee the safety of the funds. In addition, investment of pension funds are regulated by the PenCom who is empowered to sanction and if need be prosecute defaulting operators.
PFAs issue regular statements to contributors.
PFAs are saddled with the primary responsibility of effective administration of pension contributions in line with regulations to guarantee the safety of funds and reasonable returns. Furthermore, the National Pension Commission ensures prudent management of pension assets through constant supervision.
The Act stipulates a minimum retirement age of 50 years.
Upon either retirement and you are 50 years and above.
Yes, upon the loss of job and could not secure a new one for a consecutive period of 4 months.
A programmed withdrawal is a method by which the employee collects his accumulated retirement benefits in periodic sums for the length of an estimated life span.
An annuity is a product purchased from an approved life insurance company which provides monthly or quarterly income to the retiree during his/her lifetime.
PenCom is charged with the regulation and supervision of the pension schemes as well as the powers to formulate, direct and oversee the overall policy on pension matters in Nigeria.
The current pension system (Contributory Pension Scheme) operates independently without government interference.However, the government only provides supervision through its regulatory body - The National Pension Commission. The government has set up a specialized regulator of pension schemes and appointed the members of the board of the Regulator. Government will not tamper with the savings as it will not have access to them. In fact, the Government shall be primarily concerned with ensuring the safety of the savings through the establishment of the National Pension Commission.
There will be a huge pool of long-term funds available for investments which will form a foundation for economic development.
The employee’s right to accrued pension for past service is guaranteed by the Act. In the case of the Public Service of the Federation and Federal Capital Territory the right shall be acknowledged through a Federal Government Retirement Bond which shall be redeemed by the Federal Government through the Central Bank of Nigeria upon retirement of the employee. However, in the case of funded schemes and the private sector, employers shall transfer to the Retirements Savings Accounts of its employees, any funds due to the employee. The shortfall shall become a debt and treated with same priority as salaries owed. The employer shall also issue a written acknowledgement of the debt and take steps to meet the shortfall.
Pension Boards in the Private Sector already in existence will be allowed to continue to administer their pensions provided if:
There is evidence that the pension scheme is fully funded at all times and any shortfall is made up within 90 days.
The Pension funds assets are segregated from the assets of the employer/company and held by a licensed PFC.
The employer must have also effectively managed pension fund assets for at least 5 years before the commencement of the Act and have met conditions set by the PenCom.
It is only those exempted by law that have that option which include:(a) Members of the Armed Forces, the Intelligence and the Secret Service 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 less years to retire.
The Contributory Pension Scheme guarantees lumpsum and programmed withdrawal. However, an organization, at its own discretion can still elect to pay additional benefit to their staff.
The value of the minimum pension guarantee is to be determined from time to time by the National Pension Commission.
Yes. The Contributory Pension Scheme is managed by separate entities independent of your employer and it is highly regulated. There exists checks and balances among the operators.