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The short answer
Nigeria replaced its old defined benefit pensions, where the employer promised a pension based on salary and years of service, with the Contributory Pension Scheme created by the Pension Reform Act 2004 in June 2004 and re-enacted in July 2014. Under the CPS, employer and employee pay at least 18% of monthly emoluments into a personal RSA, and the pension depends on what has been saved and earned; judicial officers, the armed forces, the intelligence and secret services, and people with three years or less to retirement in June 2004 were exempted.
Older relatives talk about pensions that were promised by government and paid from the budget. Younger workers talk about RSAs, PFAs and unit prices. Both are describing Nigerian pensions, from either side of the 2004 reform. Knowing which system you are in tells you who owes you a pension, how it is worked out and who to call when it is late.
How the old defined benefit system worked
Under a defined benefit arrangement the pension is defined in advance by a formula, typically linked to final salary and length of service, and the employer is responsible for paying it. Under that design the worker does not own a personal pot. The pension depends on the employer, or the government budget, being able to pay when each instalment falls due, and the worker carries the risk that it cannot.
What the 2004 and 2014 Acts changed
PenCom's 2023 FAQ says the Contributory Pension Scheme was established in June 2004 by the Pension Reform Act 2004 and re-enacted in July 2014 as the Pension Reform Act 2014. A summary of the 2014 Act notes that it was signed on 1 July 2014, repealed the 2004 Act, and raised the minimum contribution from 15% to 18% of monthly emoluments: 10% from the employer and 8% from the employee (section 4(1)).
| Feature | Old defined benefit | Contributory Pension Scheme |
|---|---|---|
| What is promised | A pension by formula | Whatever the RSA has built up |
| Who pays in | Employer or government budget | Employer and employee, at least 18% combined |
| Where the money sits | No individual fund for most public workers | Personal RSA managed by a licensed PFA, assets held by a custodian |
| Investment risk | On the employer | On the RSA holder, within PenCom rules |
| Moving jobs | Rights tied to the employer | RSA and PIN move with you |
| Regulator | Employer's own arrangements | PenCom |
Who stayed on the old rules
PenCom's 2023 FAQ lists groups exempted from the CPS: judicial officers, members of the armed forces, and the intelligence and secret services of the Federation. It also covers people who had already retired under pre-June 2004 schemes and employees who had three years or less to retirement as at 30 June 2004.
Who pays the old pensions today
The same FAQ says the Pension Transitional Arrangements Directorate (PTAD), set up by the 2014 Act, pays pensions and gratuities to exempted retirees of Treasury-funded federal ministries, departments and agencies who retired under the defined benefit scheme. See PTAD for pre-2004 pensioners for how that works.
Workers who were in public service before 2004 and moved into the CPS had pension rights already built up. The FAQ says, for eligible federal employees, these accrued rights are paid from the Retirement Benefit Bond Redemption Fund (RBBRF), held at the Central Bank of Nigeria and funded by the Federal Government with at least 5% of the public-service wage bill. The FCT keeps its own RBBRF account. At retirement the accrued rights are credited to the RSA.
Careers that span the reform can be confusing. Someone who worked in a federal agency before 2004 and then moved to a private company will usually have accrued rights for the public service years and RSA contributions for the rest, all paid through one RSA. Someone who moved the other way has the same single RSA. If an earlier employer's records are missing, raise it with your PFA early rather than at retirement, while former colleagues and paper records can still be traced.
Who is covered by the CPS now
PenCom's FAQ says the scheme applies to all tiers of government and to private organisations with three or more employees. People in smaller organisations, and the self-employed, can join through the Micro Pension Plan. See micro pension for the self-employed.
What it means for you
- If you started work after June 2004 in a covered organisation, you are in the CPS. Your pension depends on contributions and returns; check your RSA balance regularly.
- If you are a federal public servant who joined before 2004, part of your retirement income may come from accrued rights paid into your RSA at retirement.
- If you retired before June 2004 from a Treasury-funded federal body, or were in an exempted service, your pension is under the old arrangements, not an RSA.
- State and local government schemes vary; some states adopted contributory schemes on their own timelines. Check with your state pension board.
Worked example: the CPS in numbers
Example only. A worker earning ₦250,000 a month in pensionable emoluments has at least ₦45,000 a month paid in (18%): ₦25,000 from the employer and ₦20,000 from pay. That is ₦540,000 a year before any investment return. Under the old defined benefit design, the same worker's pension would instead have been set by a formula at retirement. For how this builds up, see how the RSA system works.
Questions people ask
What is the difference between contributory and defined benefit pension?
A defined benefit pension is set by a formula and paid by the employer. A contributory pension depends on what you and your employer paid into your RSA and how it was invested.
Who is exempted from the contributory pension scheme?
PenCom lists judicial officers, the armed forces, the intelligence and secret services, people already retired before June 2004, and those with three years or less to retirement at 30 June 2004.
When did the contributory pension scheme start in Nigeria?
June 2004, under the Pension Reform Act 2004. It was re-enacted by the Pension Reform Act 2014, signed on 1 July 2014.
Who pays pensions of those who retired before 2004?
For Treasury-funded federal retirees under the old scheme, the Pension Transitional Arrangements Directorate (PTAD), according to PenCom's FAQ.
Sources
- Frequently Asked Questions 2023, National Pension Commission · accessed Oct 2026
- Highlights of the Pension Reform Act (PRA) 2014, Standard Bank Community · accessed Oct 2026
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