PenCom and the Contributory Pension Scheme, explained.

1. What PenCom is

The National Pension Commission (PenCom) is the federal body that regulates and supervises pensions in Nigeria under the Pension Reform Act 2014. It oversees the Contributory Pension Scheme (CPS), the mandatory pension arrangement that most employers and employees pay into throughout an employee's working life.

PenCom does not hold your contributions directly. It licenses and supervises the private companies that do: Pension Fund Administrators (PFAs), who manage individual retirement accounts, and Pension Fund Custodians (PFCs), who hold the actual pension assets in trust.

2. Who must comply

The Pension Reform Act 2014 makes the Contributory Pension Scheme mandatory for:

• Every employer in the public service of the Federation, the Federal Capital Territory, and states that have adopted the scheme.
• Every private sector employer with 15 or more employees.
• Employees who are Nigerian citizens working in the private sector, once their employer meets the headcount threshold.

Employers with fewer than 15 employees are not legally compelled to register with PenCom, but can participate voluntarily, and many do so to offer a competitive benefits package. Self-employed people and workers in the informal sector can also contribute through PenCom's Micro Pension Plan, introduced for organisations with fewer than three employees and individuals without a formal employer.

3. Contribution rates

The Pension Reform Act 2014 sets minimum contribution rates based on an employee's monthly emoluments, generally understood as basic salary, housing allowance, and transport allowance:

• Employer: a minimum of 10% of monthly emoluments.
• Employee: a minimum of 8% of monthly emoluments.

That gives a combined minimum contribution of 18%. Employers are free to contribute more than the minimum, and some do as part of their benefits offering, but cannot contribute less. Where an employer chooses to bear the full pension contribution alone, at least 20% of monthly emoluments must be paid in, under PenCom's alternative funding provision.

4. Retirement Savings Accounts

Every employee under the scheme opens a Retirement Savings Account (RSA) with a PFA of their own choosing. The RSA follows the employee from job to job for their entire career, it is not tied to any single employer. Each RSA has a unique Personal Identification Number (PIN) that employers use to route contributions correctly.

Employees can change their PFA once every year if they are unhappy with the service or returns, through a formal transfer window process managed by PenCom.

5. Remittance

Employers deduct the employee's 8% from their pay and add the employer's own 10%, then remit the full combined amount to the employee's PFA/RSA within 7 working days of the employee being paid their salary. This is a shorter deadline than most other statutory deductions, so pension remittance needs to happen almost immediately after each payroll run.

6. Penalties for late or missed remittance

Under Section 11 of the Pension Reform Act 2014, an employer who fails to remit pension contributions within the stipulated time is liable to a penalty in addition to the outstanding contribution itself. The penalty is paid directly into the employee's RSA, on top of the arrears, and PenCom can pursue recovery through its enforcement powers, including naming non-compliant employers publicly.

7. How Wadata HR handles pension for you

Wadata HR calculates the correct employer and employee pension contributions automatically on every payroll run, using each worker's monthly emoluments and their RSA PIN. Every payroll generates a pension remittance schedule broken down by PFA and RSA PIN, ready to hand to your finance team or accountant for remittance within the 7-working-day window.