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Understanding How Monthly Pensions Are Paid To Retirees Under Contributory Pension Scheme In Nigeria

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The Contributory Pension Scheme (CPS) was introduced in Nigeria as part of the Pension Reform Act of 2004 to ensure sustainable and transparent pension administration. For retirees under the CPS, understanding how monthly pensions are paid, how pensions are calculated, and how enhancements can be made over time is crucial. Below is a detailed breakdown of these processes.
How Monthly Pensions Are Paid
Retirees under the CPS have two primary options for receiving their monthly pensions: Programmed Withdrawal and Annuity. Programmed Withdrawal is managed by Pension Fund Administrators (PFAs) and involves structured monthly payments drawn from the retiree’s Retirement Savings Account (RSA). Annuity is a life insurance product purchased from an insurance company, ensuring steady monthly payments for life. The disbursement process depends on the type of benefit being accessed. For example, Programmed Withdrawal involves monthly payments structured over the retiree’s expected lifespan. The 25% Loss of Job benefit allows employees who lose their jobs and remain unemployed for at least four months to access 25% of their RSA balance. The 25% Equity Mortgage benefit allows a portion of the RSA to be used as equity contribution for a mortgage, subject to specific conditions. For Death Benefits, the RSA balance is paid to the designated beneficiaries. All disbursements start with the customer completing the necessary documentation for the benefit type, obtaining approval from PenCom, and then receiving payment. The National Pension Commission (PenCom) has oversight over all pension disbursements to ensure compliance, transparency, and accuracy.
How Pensions Are Calculated
The calculation of monthly pensions depends on several factors. First, the balance in the RSA is a key determinant, which includes contributions made by both the employee and employer, plus accrued investment returns, forming the total RSA balance at retirement. Second, life expectancy assumptions are made, and PenCom periodically determines the average life expectancy used in calculating the programmed withdrawal. Third, retirees can withdraw up to 25% of their RSA balance as a lump sum, provided the remaining balance can fund a reasonable monthly pension. The monthly pension under Programmed Withdrawal is calculated using the formula: Monthly Pension = RSA Balance / Number of Expected Monthly Payments (Life Expectancy in Months). For example, if a retiree has an RSA balance of ₦10 million and a life expectancy of 20 years (240 months), the monthly pension will be approximately ₦41,667 at the start of the programmed withdrawal. For retirees choosing annuities, the insurance company determines the monthly pension based on the purchase price, interest rates, and life expectancy.
Conditions for the Calculations
Pensions are calculated only when the individual has reached the statutory retirement age of 60 years or has completed 35 years of service. Individuals who retire before the statutory age may access their RSA balance but must meet specific conditions, such as being out of employment for at least four months. In the event of the retiree’s death, the remaining RSA balance is paid to the designated beneficiaries.
Impact of the New National Minimum Wage on Pensions
In line with President Bola Ahmed Tinubu’s approval of the new National Minimum Wage Act, which increased the wage from ₦30,000 to ₦70,000, PenCom has updated its regulations. If a retiree’s monthly or quarterly pension is less than ₦23,333.33 (one-third of the current minimum wage), they are allowed to withdraw their RSA balance en bloc or continue receiving their current pensions pending the commencement of the Minimum Pension GuarantePension Fund Administrators (PFAs) must now use ₦70,000 as the basis for processing retirement benefits under the relevant provisions. This adjustment reflects the commitment to ensuring retirees receive adequate support to meet basic living standards.
Understanding Basic Lump-Sum Withdrawals
Retirees can withdraw a portion of their RSA balance as a lump sum, subject to PenCom’s regulations. The lump-sum amount is determined such that the remaining RSA balance can provide a monthly pension of at least 50% of the retiree’s last monthly basic salary. This provides immediate liquidity for retirees to address pressing financial needs, such as settling outstanding debts or making investments. However, taking a larger lump sum reduces the RSA balance available for monthly pensions.

Movement in Fund Unit Prices and Associated Fees
The fund’s unit price fluctuates based on market conditions and the performance of the underlying investments during the period under consideration. The returns for the fund are calculated after deducting audit fees and management fees. Management fees comprise fees charged by the PFA, Pension Fund Custodian (PFC), and PenCom. These fees vary depending on the specific fund and are calculated either on the Net Asset Value (NAV) or as income-based (derived from income generated by the fund during the period), as is the case with Fund IV.
Enhancing Monthly Pensions Over Time
To ensure that retirees receive improved monthly pensions, several measures can be implemented within the CPS. First, PFAs should adopt robust asset allocation strategies to maximize returns on pension funds, particularly by diversifying investments into infrastructure, real estate, and other high-yield sectors. Second, encouraging voluntary contributions during active employment can significantly boost the RSA balance at retirement. Third, employers can enhance an employee’s pension beyond the 10% statutory requirement. In addition, lowering fees and charges associated with RSA management will leave more funds available for disbursement to retirees. Fourth, introducing a mechanism to adjust pensions in line with inflation can maintain retirees’ purchasing power. Fifth, educating employees about the benefits of making additional voluntary contributions and starting early savings is crucial. Finally, offering incentives for employees who delay retirement allows them to accumulate more savings and reduce the strain on their RSA.
The CPS provides a structured framework for ensuring retirees’ financial security. Understanding how monthly pensions are paid, calculated, and enhanced can help individuals plan effectively for retirement. By implementing measures to boost RSA balances, optimize investment returns, and reduce fees, the CPS can continue to deliver sustainable and improved pensions, providing dignity and financial independence for retirees.

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NIA Strives To Simplify Claims Payment

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By Sola Alabadan

The Nigerian Insurers Association (NIA) is working to simplify the claims payment process and enhance customer service, with a focus on prompt payment of claims and ease of onboarding insurance customers

NIA Chairman, Mr. Kunle Ahmed, stated this in Lagos during the maiden Insurance Week, with a call to action for Nigerians to embrace insurance.

The week-long event with the theme, “Insurance For All: Securing Nigeria’s Future,” was organised by the Chartered Insurance Institute of Nigeria (CIIN) under the leadership of the Institute’s President, Mrs. Yetunde Ilori, to create awareness about the various services and products offered by insurance companies.

The NIA boss said that the insurance week is for the insuring public and intending clients, hence insurers have come up with new products for their customers.

He said: “this week, all insurance practitioners are focused on activities that will further create awareness for the insurance industry, including prompt claims payment, insurance products, ease of onboarding insurance customers and general awareness.

The NIA Chairman also urged Nigerians to consider purchasing insurance products to secure their future.

He added that all arms of the industry is fully partcipating in the Insurance Week programme to increase insurance penetration and provide Nigerians with the protection they needed.

The NIA Chairman, cited the industry’s payment of N622 billion claims to customers in 2024 as an testament of its effectiveness and reliability.

Ahmed advised those with issues with insurance companies to reach out to the NIA or the CIIN for assistance.

He assured the public that the National Insurance Commission (NAICOM) is committed to protecting the rights and interests of clients.

“With a vibrant regulatory framework in place, the industry is working to ensure that insurance companies operate efficiently and effectively,”the NIA Chairman said.

Other dignitaries at the event included : Mr. Olusegun Omosehin, Commissioner For Insurance, Mr Eddie Efekoha, Chairman, Organising Planning Committee of the maiden Insurance Week, Prince Babatunde Oguntade, President, NCRIB, Mr Tope Smart, Chairman, NEM Insurance,among others.

The Insurance Week which began on Saturday, June 28, 2025 with the Insurance Awareness Walk, would continue on Tuesday with the Insurance Awareness Campaigns at Secondary Schools and MSMEs.

An Insurance Outreach would take place on Wednesday at major markets and stores, while an Hackathon competition would hold at CIFM, Asese on Thursday, where young minds, students, and professionals will come together to develop bespoke insurance products that meet the needs of customers.

On Friday would be the grand finale of the programme to recognise and award practitioners in the industry who have contributed significantly to promoting insurance in Nigeria.

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CIIN Takes Insurance Education To Markets, Malls In Lagos

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The Chartered Insurance Institute of Nigeria (CIIN) recently organised Community Outreach and Roadshow in Lagos, as part of its broader mission to deepen insurance awareness and improve financial literacy among everyday Nigerians.

Held across key commercial hubs in Lagos, the roadshow made impactful stops at Sabo, Bariga, Oyingbo Market, Shoprite Ikeja, and SPAR Tejuosho, where the public was engaged on the relevance of insurance in everyday life.
Through vibrant street activations, interactive sessions, and one-on-one engagements, the initiative focused on demystifying insurance and breaking down its benefits in relatable terms.

At each location, insurance practitioners were on hand to share insights, answer questions, and distribute informative materials that addressed common misconceptions about insurance and highlighted the ease of access to insurance products tailored for individuals, traders, and small businesses.

The community outreach was part of the programmes lined up for the Insurance Week with the theme, “Insurance For All: Securing Nigeria’s Future”.
The one week long event was organised by the CIIN under the leadership of the Institute’s President, Mrs. Yetunde Ilori, to create awareness about the various services and products offered by insurance companies.

Speaking on the initiative, the Head of Brands and Event, Rex Insurance, Emmanuel Ndoh noted: “Insurance is not a luxury; it’s a necessity. We are proud to be part of this collaborative effort with CIIN to take insurance education directly to the people—where they live, shop, and work. Our goal is to build trust and show that with Rex Insurance, you’re not alone.”

This outreach effort is part of the programmes of the Insurance Week organised by the nation’s insurance industry to make insurance simpler, more accessible, inclusive and become a household name in the country.

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Universal Insurance, NHIA, PTAD, Rite Foods, Sponsor NAIPE 2025 AGM

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The Universal Insurance Plc, National Health Insurance Authority (NHIA), Pension Transitional Arrangement Directorate (PTAD), as well as Rite Foods Limited, will be sponsoring the 2025 Annual General Meeting (AGM) of the Nigerian Association of Insurance and Pension Editors (NAIPE) on July 8 in Lagos.
NAIPE is the umbrella body for journalists covering insurance and pension sectors in Nigeria.
Companies that sponsor the AGM have the unique opportunity to market their products and services to NAIPE members during the event who will in-turn push out the information to the general public through publication of stories and analysis in their mediums and platforms.
Stories generated from the event will be in the media for over one month.
The Universal Insurance Plc is one of the nation’s largest personal lines insurer with over N8 billion in assets, selling eight major lines of insurance, including auto, property and commercial.
Universal Insurance offers a broad spectrum of insurance products for all types of businesses, corporate and individuals with unique services delivery.
According to Universal Insurance Plc, “Our vision is to be a dominant, specialised non life insurer in Nigeria, creating and delivering value to stakeholders while our mission is to offer specialised non life insurance protection to clients inspired by innovation, efficiency and prompt claims settlement.”
The National Health Insurance Authority (NHIA) was established under the National Health Insurance Act which was signed into law on 19 May 2022, replacing the National Health Insurance Scheme Act of 1999.
As of today, data shows that about 20 million Nigerians are covered by the scheme.
NHIA offers several benefits, including financial protection against high medical costs, access to quality healthcare services, and a comprehensive benefits package that covers a wide range of medical needs.
Meanwhile, the Pension Transitional Arrangement Directorate (PTAD) was established in 2013 and drawing its mandate from the Pension Reform Act of 2014, PTAD was tasked with consolidating and managing pensions under the Defined Benefit Scheme (DBS) for pensioners who retired on or before June 30, 2007 and did not transit to the Contributory Pension scheme.
PTAD has marked a significant milestone of revolutionising Nigeria’s public sector pension administrative system.
When the Directorate was created, it inherited a host of challenges that had long plagued the legacy pension offices. These offices, comprising the Police, Customs, Immigration, Prisons, and the Civil Service, as well as the Boards of Trustees of Treasury funded Parastatals, Universities and Research Institutions and Agencies, were historically managed in a fragmented, inefficient, and underfunded manner. By 2004, this mismanagement had culminated in pension liabilities exceeding N2 trillion.
At the helm of affairs of the Directorate is the Executive Secretary, Tolulope Abiodun Odunaiya, a dynamic and results-oriented professional with a proven track record of managing complex workflows and consistently driving measurable outcomes. She was appointed to the position in November 2024, by President Bola Ahmed Tinubu.
Rite Foods Limited is the producer of Bigi Drinks, Fearless Energy Drinks, Sosa Fruit Drinks, and Rite and Bigi Sausage Rolls.
The company ably led by managing director/CEO, Mr. Seleem Adegunwa, believes in the power of innovation and its potential to change the recycling business.
As Nigeria’s top food and beverage manufacturer, it said: “we are committed to helping recyclers to adopt cutting-edge techniques to recycling plastic trash, particularly in coastal areas, among other Corporate Social Responsibility (CSR) initiatives.”

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