Pension Contribution in Nigeria: What Employees and Employers Pay

Short answer: Under the Pension Reform Act, employees typically contribute 8% and employers 10% of pensionable emoluments (usually basic salary, housing, and transport). Both go to a Pension Fund Administrator (PFA) via a Retirement Savings Account (RSA).

That pension line on your payslip is not optional noise. It is retirement savings with legal backing.

Who must contribute?

Generally, employers with 15 or more employees must participate in the contributory pension scheme. Smaller employers may still enroll voluntarily. Employees in covered schemes must contribute.

The standard split

Pensionable emoluments usually means basic + housing + transport. Other allowances may be excluded unless your policy includes them.

Example

Monthly pensionable pay: ₦400,000

• Employee: 8% = ₦32,000
• Employer: 10% = ₦40,000
• Total to RSA: ₦72,000

Your payslip shows the ₦32,000 deduction. Employer ₦40,000 may appear on the slip for transparency but does not reduce your net twice.

How it connects to tax

Employee pension reduces taxable income for PAYE purposes. That is one reason salary is structured into basic/housing/transport instead of one flat "pay" line.

Choosing a PFA

When you join a covered employer, you pick a Pension Fund Administrator. If you do not, you may be assigned one. You can later transfer between PFAs following official rules.

When you leave a job

Your RSA stays with you. Options typically include:

• Leave balance invested until retirement age
• Programmed withdrawal or lump sum at retirement (rules apply)
• Transfer to a new employer's scheme continuity

Do not cash out casually; early access rules are strict.

Employer obligations

• Register with Pension Commission (PenCom) ecosystem
• Remit employee + employer contributions monthly
• Keep records matching payslips

Late remittance hurts employees' compounding and creates compliance risk.

Common employee questions

"Why is pension so high?" It is 8% of pensionable pay by law, plus employer 10% on top.

"Can I opt out?" Generally no in covered employment.

"Does it replace savings?" It is long-term retirement money, not your emergency fund.

Micro pension for freelancers

If you are self-employed, Micro Pension schemes exist so you can save similarly without a traditional employer.