PenCom Urges Full Implementation of Contributory Pension Scheme to Ensure Secure Retirement for All Nigerians

States Must Align with Pension Reform for Sustainable Retirement Security, Says PenCom

The National Pension Commission (PenCom) has renewed its call for all state and local governments in Nigeria to fully implement the Contributory Pension Scheme (CPS) to guarantee sustainable retirement security for public sector employees.

In accordance with the Pension Reform Act (PRA) 2014, Section 2(1), the CPS is designed to apply to all employees in the public sector at the federal, state, and local government levels, as well as in the private sector. However, due to constitutional provisions, state governments are responsible for enacting and domesticating the CPS within their jurisdictions by passing appropriate pension laws.

PenCom highlighted that since the National Council of States adopted the CPS for all states and local governments in August 2006, it has worked to support state governments by providing a Model State Pension Law, which serves as a framework that can be modified to suit state-specific needs. The commission also reviews draft pension laws and guides states through the implementation process.

CPS Implementation: States Lagging Behind

Despite these efforts, PenCom noted that many states have yet to fully implement the CPS. To achieve complete compliance, a state must:

• Enact a law adopting the CPS
• Establish a Pension Bureau
• Register its employees with Pension Fund Administrators (PFAs)
• Ensure timely remittance of pension contributions
• Conduct an Actuarial Valuation
• Begin funding Accrued Pension Rights
• Procure Group Life Insurance for workers
• Open and fund a Retirement Benefits Bond Redemption Fund Account with the Central Bank of Nigeria (CBN) or a PFA

As of December 31, 2024, only a few states have demonstrated exemplary compliance with the CPS. These states include Lagos, the Federal Capital Territory (FCT), Osun, Kaduna, Ekiti, Edo, Ondo, Delta, Benue, Anambra, and Jigawa. These states have been commended for ensuring that retirees receive their entitlements promptly, consistently remitting both employer and employee contributions. However, Jigawa operates under the Contributory Defined Benefits Scheme (CDBS) rather than the CPS.

Meanwhile, several states have enacted CPS laws but have not made meaningful progress toward implementation. These states include Abia, Adamawa, Bauchi, Bayelsa, Ebonyi, Enugu, Gombe, Imo, Kano, Katsina, Kebbi, Kogi, Nasarawa, Niger, Ogun, Oyo, Rivers, Sokoto, Taraba, and Zamfara. PenCom has urged these states to accelerate efforts toward full compliance, particularly in remitting employer and employee pension contributions.

However, the commission expressed concern that the following states have yet to commence implementation of the CPS: Akwa Ibom, Borno, Kwara, Plateau, Cross River, and Yobe. PenCom strongly advises these states to enact the necessary laws and take decisive action toward full implementation.

CPS: A Necessary Transition for Pension Stability

PenCom reaffirmed that the transition from the Defined Benefits Scheme (DBS) to the CPS is inevitable for all states and local governments. The CPS ensures that retirees receive their benefits promptly, eliminating the pension payment delays and backlogs associated with the DBS. It also prevents states from accumulating unsustainable pension liabilities, which place a long-term financial burden on taxpayers.

The commission emphasized that adopting the CPS fosters fiscal discipline, enabling states to accurately determine and settle pension obligations without accumulating arrears. By ensuring that pension funds are readily available at the point of retirement, the CPS contributes to economic stability and enhances public trust in the pension system.

PenCom’s Commitment to Pension Security

PenCom reiterated its commitment to ensuring full compliance with the CPS across Nigeria. It will continue to engage with non-compliant states, providing technical guidance, advisory support, and oversight to facilitate the transition.

A pension-secure Nigeria is not just an aspiration but an achievable reality. However, this depends on the commitment of all states to implementing the CPS in full. By embracing the reform, state governments can guarantee a dignified and financially stable retirement for their employees while ensuring a sustainable pension framework for future generations.

PenCom remains resolute in its role as the regulator and supervisor of Nigeria’s pension industry, striving toward a future where all workers can retire with financial security and peace of mind.

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