Nigeria’s Pension Reform Act enacted in 2004 and subsequently repealed and re-enacted in 2014was necessitated by the myriad of problems that plagued the “pay-as-you-go” schemes in the public sector and the varying types of pension schemes that existed within the private sector, which resulted in retirees not getting their benefits.

The Pension Reform Act (PRA 2014), provide Nigerians with two variants of a fully funded pension scheme: The Contributory Pension Scheme (CPS) and The Micro Pension Plan (MPP).

The Contributory Pension Scheme (CPS) is a mandatory contributory pension scheme. It is obligatory for employees in the formal sector where the employer and the employee contribute towards the payment of the employee’s pension at retirement.

The Micro Pension Plan (MPP) is a voluntary pension scheme for individuals in the informal sector or MSMEs where the individual/contributor solely funds the payment of his/her pension at retirement.

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CPS vs MPP

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CPS

MPP

Sector of Economy

CPS

Scheme is mandatory for all employees in the Public Service of the Federation, the Federal Capital Territory, the States, the Local Government as well as in the Private Sector

MPP

Scheme is mandatory for all employees in the Public Service of the Federation, the Federal Capital Territory, the States, the Local Government as well as in the Private Sector

Company Size

CPS

Persons working with organisation with > 3 members of staff

MPP

Persons working with organisation with < 3 employees or are conducting trade or business for self

Frequency of Contributions

CPS

Contributions are remitted monthly by the employer

MPP

Contributions are remitted periodically at the convenience of the participant

Funding Requirement

CPS

The employer and the employee contribute a minimum of 10% and 8% of the employee’s basic, housing & transport monthly allowances.

MPP

Employee/participant contributes as he/she desires; contributions are not defined

Other Funding

CPS

Additional voluntary contribution (AVC) is allowed and may be accessed before retirement

MPP

Contingent contribution is 40% of every contribution and may be accessed before retirement

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Contributory Pension Scheme - CPS

Contributory Pension Scheme - CPS

The Contributory Pension Scheme (CPS) was established in June 2004 by the Pensions Reform Act 2004 (as amended). It is an arrangement where both the employer and the employee contribute towards the payment of the employee’s pension at retirement.

It is a fully funded contributory scheme from an employee’s monthly emoluments who belongs to an organisation with employees of three and more employees.

Frequently Asked Questions

Pension contributions are paid directly to the PFC by the employer to be held on the order of the PFA. The PFC notifies the PFA immediately upon receipt of the contributions.

An employer may agree on payment of additional benefits to the employee upon retirement or elect to bear the full responsibility of the scheme provided the total amount contributed by the employer should not be less than 18% of the employee’s monthly emoluments.

Yes, the scheme allows employees to, in addition to the 18% employee and employer contributions make voluntary contributions into their RSAs.

Please follow the link below for more FAQs about the contributory pension scheme;

Micro Pension Plan - MPP

Micro Pension Plan - MPP

The Micro Pension Plan (MPP) was launched on in March 2019. It is designed to allow the self employed and persons working in organisations with less than three employees make financial contributions towards the provision of pensions at their retirement or incapacitation

It is a fully funded voluntary plan by a contributor who may be self employed or belongs to a trade/association/profession or an organisation with less than three employees.

Frequently Asked Questions

No, you are either on the MPP or the CPS.

No Limits. It may be daily, weekly, monthly or as may be convenient to them.

Every contribution received is split into two portions: The Contingent portion (40%) and the Retirement Benefit portion (60%). The Contingent portion of the contribution can be accessed totally or partially, only after the initial remittance has stayed in the RSA for at least 3 months. Also, upon retirement and having attained the mandatory age of 50 years, you can access your retirement benefits in line with the Regulation for Administration of Retirement and Terminal benefits. This is also applicable to contributors that retired on medical grounds.

No, you can only make contributions in Nigerian currency.

No, but he can make VOLUNTARY contributions in his/her CPS which has nothing to do with Micro Pensions Scheme.

No, participants in mandatory contribution cannot convert to Micro Pension Plan.

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