How does the new pension scheme work?
The scheme is a government initiative of pension administration that would be privately managed. The scheme requires the employer and employee to contribute a total of 15% of the employee’s monthly salary to a retirement account to be managed by a pension fund administrator. The total sum of your contributions plus any attributable investment income would be collected by the employee at retirement.

What are the benefits of the scheme to workers?
It ensures that the worker receives his or her benefits as and when due. It enables the employee to save to ensure a steady income during retirement.

What are the contribution payments?
The employee and the employer contribute a total of 15% of the employee’s monthly emoluments. (ie: 7.5% and 7.5% respectively, except for military personnel where the contribution rate is 2.5% and12.5%). The minimum that the employer can pay is 7.5%. The employer can undertake to pay a higher percentage or even the total 15%. The scheme is for both the private and public sectors.

Does this contribution (7.5% of monthly salary) include tax and other dues that are removed from the employees salaries?
It does not include tax, which goes directly to the government or other deductions that you and your employer would have agreed on appointment.

Is the contribution tax-free?
Yes, the contributions are tax-free.

Who is going to handle the pension funds, Government?
The National Pension Commission (PenCom) will act as the regulatory and supervisory board and as a National Data Bank for the pension funds. The Pension Fund Custodian (PFC) receives the total contributions directly from the employers, while the Pension Fund Administrator (PFA) invests and manages the pension fund assets of the employee.

Who is the PFA (Pension Fund Administrator)?
The PFA are companies duly licensed by the PenCom. The PFA is in charge of the investment and management of the employees’ pension fund. The employee chooses his or her own PFA.

Must I have a PFA?
Yes, it is for your own convenience. The Federal Government has approved competent professionals to manage your retirement savings.

If yes, then who pays the PFA?
The employee pays the PFA. It will be based on agreed terms.

Can I change PFAs?
Yes, the employee can change PFAs. However, the employee must stay with his chosen PFA for at least one year before changing to another.

Is it like a savings account?
The pension fund is a Retirement Savings Account (RSA) but does not operate as a normal savings account. The employee will not be able to withdraw money from his or her account before the age of 50 years or retirement, except in cases of mental or physical disability

Can I borrow from the money?
No, you cannot, as you do not have direct access to the money.

How do I get my funds after retirement?
The PFA shall be responsible for all calculations in relation to retirement benefits. The retirement benefits shall be utilized by the employee in the form of an annuity, which essentially are programmed withdrawals that are paid out to the beneficiary at periodic intervals.

At what time is the fund beneficial to me?
It is beneficial to the employee when he or she gets to the age of 50 years or retires or in case of physical disabilities.

What happens to my pension funds when I change employment?
The employer does not have any direct dealings with pension funds it is the PFA that handles the funds. The employee informs the PFA of change of jobs. Your funds remain intact. Your new employer will then take over the remittance of contributions.

What happens to the pension fund upon death of the worker?
The next of kin of the worker as stated in relevant documents becomes the beneficiary of the funds of the worker.

Is it meant for all workers?
The scheme is meant for all workers in the private and public sectors except those employees who have less than 3 years to retirement and categories of persons mentioned in Section 291 of the 1999 constitution, that is, various categories of judicial officers. The scheme also does not affect small business with 4 employees or less.

Does the scheme cover my health and life insurance?
It does not include life or health insurance as a separate scheme has been set up for that.

What is going to happen to previous contributions to NSITF?
Funds contributed by any person to the NSITF shall be computed and credited to the Retirement Savings Account of the contributor in his present PFA