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The short answer
Most federal civil servants who joined or were serving after June 2004 retire under the Contributory Pension Scheme: the pension is paid from their RSA balance, as programmed withdrawal from the PFA or an annuity from a life insurer. A lump sum is allowed only if what remains can pay a pension of at least 50% of their remuneration at retirement, per PenCom's 2024 guidance note. Pre-2004 retirees and those exempted stay on defined-benefit pensions paid through PTAD.
There are two systems for federal civil servants, and which one applies depends on when you retired or how close you were to retirement in 2004. The Contributory Pension Scheme (CPS) was set up by the Pension Reform Act 2004 in June 2004 and re-enacted in July 2014, according to PenCom's 2023 FAQ. The same FAQ says people who had retired before June 2004, and those who had three years or less to retirement on 30 June 2004, were exempted and remain on the old defined-benefit (DB) arrangement.
Under the CPS: it starts with your RSA balance
Your retirement savings account holds your and your employer's contributions, any accrued-rights bond credited for service before 2004, any voluntary contributions, and the investment returns on all of it. At retirement, or age 50 whichever is later, the balance is used in one of two ways:
- Programmed withdrawal
- The PFA keeps managing your balance and pays you monthly or quarterly. The PFA pays it under PenCom's template, and the remaining balance stays in your RSA.
- Retiree life annuity
- You use the balance to buy a lifetime income from a NAICOM-licensed life insurer. TrustFund Pensions notes the annuity is bought from a NAICOM-licensed life insurer, and the insurer then pays you for life. Ask about switching rules before you sign.
The lump sum rule
PenCom's guidance note on the revised programmed withdrawal template (version 2, December 2024) says a lump sum is allowed only if the balance left after it can provide a pension of not less than 50% of your annual remuneration at the date of retirement. It also says the revision lifts the earlier restriction that capped lump sums at 50% of the RSA balance. The monthly pension under programmed withdrawal is based on your expected life span using an adjusted mortality table, an assumed rate of return and fees, computed in PenCom's template.
Worked example (simplified)
Example only. BusinessDay's explainer illustrates programmed withdrawal as the balance divided by the expected number of months. We use the same simplification, with 240 months; the real template adjusts for returns, fees and mortality, so your PFA's figure will differ.
| Step | Figure |
|---|---|
| RSA balance at retirement | ₦40,000,000 |
| Monthly remuneration at retirement | ₦250,000 |
| Minimum monthly pension (50%) | ₦125,000 |
| Balance needed to pay ₦125,000 for 240 months | ₦30,000,000 |
| Maximum lump sum: 40,000,000 − 30,000,000 | ₦10,000,000 |
| Pension if no lump sum: 40,000,000 ÷ 240 | ₦166,666.67 a month |
A larger lump sum means a smaller monthly pension for the rest of your life. Many retirees take less than the maximum for that reason.
Small balances and early access
- If your balance cannot provide a pension of at least one-third of the prevailing national minimum wage, TrustFund Pensions says it can be paid out en bloc. With the minimum wage at ₦70,000, that threshold works out at ₦23,333.33 a month, the figure BusinessDay also cites.
- If you lose your job and are not re-employed after at least four months, TrustFund Pensions says you can access 25% of your RSA, once in a lifetime.
- Voluntary contributions can be accessed separately; TrustFund Pensions notes tax applies if they are withdrawn within five years.
Pre-2004 and exempted retirees: defined benefit
Under the DB system, the pension is a fixed amount worked out from your final salary and years of service under the old pension law, not from an account balance. For Treasury-funded MDAs, PenCom's FAQ says these pensions are paid by the Pension Transitional Arrangement Directorate (PTAD), which was set up by the 2014 Act. We have not found the old computation formula on an official page we could open, so we do not reproduce it here; PTAD and your former MDA hold your computation sheet, and you can ask for it.
DB pensions are reviewed. NSIWC circular SWC/S/04/S.542/III/461 of 27 September 2024 approved an increase of ₦32,000 a month on the pensions of retirees under the defined benefits scheme of agencies on CONPSS and eleven other federal structures, with effect from 29 July 2024. PenCom's December 2025 circular to self-funded agencies cites section 173(3) of the Constitution: pensions are reviewed every five years or together with federal civil service salary reviews, whichever is earlier, and lists earlier increases including 33% in 2014 and 20% and 28% in 2024.
What to check first
- Which scheme you are on: CPS or DB.
- For CPS: your latest RSA statement, data recapture status and whether your accrued-rights bond has been credited.
- Complete data recapture with your PFA before you request benefits, as TrustFund Pensions requires.
- Ask your PFA to run the programmed withdrawal template with and without a lump sum.
- For DB: your PTAD verification and whether the ₦32,000 adjustment and arrears from 29 July 2024 appear.
Where Pryme fits
If you take a lump sum, decide what each part is for before it arrives. A Naira Savings Box can hold a buffer separate from spending money. Our guides to living on a pension and pension contributions cover the wider picture.
Questions people ask
How is pension calculated for federal civil servants in Nigeria?
Under the CPS, from your RSA balance using PenCom's programmed withdrawal template (life expectancy, assumed returns and fees) or by buying an annuity. Under the old DB scheme, from final salary and years of service.
How much lump sum can I take from my RSA at retirement?
As much as leaves enough to pay a pension of at least 50% of your remuneration at retirement, per PenCom's December 2024 guidance note.
Who pays pensions for retirees before 2004?
For Treasury-funded MDAs, PTAD pays defined-benefit pensions, according to PenCom's FAQ.
Did pensioners get an increase with the new minimum wage?
Yes for DB retirees of agencies on the listed structures: NSIWC approved ₦32,000 a month from 29 July 2024.
Sources
- PenCom: Frequently asked questions (2023) · accessed Oct 2026
- PenCom: Guidance note on the revised programmed withdrawal template, version 2 (Dec 2024) · accessed Oct 2026
- NSIWC circular SWC/S/04/S.542/III/461: consequential adjustment in pensions (27 Sep 2024) · accessed Oct 2026
- PenCom circular on pension increases for FG self-funded agencies (8 Dec 2025) · accessed Oct 2026
- TrustFund Pensions: Benefit payment types · accessed Oct 2026
- BusinessDay: How your monthly pension is calculated and paid (15 Jan 2025) · accessed Oct 2026
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