Retirement Plan Template for Nigeria

A Retirement Plan helps Nigerian workers save money throughout their careers to support themselves after they stop working. These plans follow rules set by Nigeria's Pension Reform Act and can include both employer and employee contributions to a Retirement Savings Account (RSA) managed by licensed Pension Fund Administrators.

The most common type requires employers and staff to contribute a combined minimum of 18% of monthly earnings - with companies putting in at least 10% and employees adding 8%. This money grows through investments overseen by PFAs and becomes available when workers reach 50 years old or retire, providing crucial financial security during retirement years.

Start your Retirement Plan as soon as you begin working in Nigeria - the earlier you contribute, the more financial security you'll build for later years. Nigerian law requires every employer with 3 or more staff to enroll employees in a pension scheme, making retirement planning a mandatory part of employment.

Key moments to review your Retirement Plan include changing jobs, receiving a promotion, or when your employer modifies their pension arrangements. The Pension Reform Act requires immediate enrollment of new employees, and your plan needs updating whenever your salary changes to ensure proper contribution calculations and maintain compliance with PenCom regulations.

• Contributory Pension Scheme (CPS): The main retirement plan type in Nigeria, requiring both employer and employee contributions, managed by licensed PFAs
• Voluntary Contribution Plan: Allows additional retirement savings beyond the mandatory CPS amounts, offering tax advantages up to certain limits
• Micro Pension Plan: Designed for self-employed individuals and small business owners, with flexible contribution schedules
• Defined Benefit Scheme: Legacy retirement plans still operating in some government sectors, guaranteeing specific pension amounts based on final salary
• Group Life Insurance: Mandatory complement to retirement plans, providing death benefits worth 3x annual salary

• Employers: Must enroll eligible staff, make mandatory 10% contributions, and ensure timely remittance to PFAs
• Employees: Contribute 8% of monthly earnings and choose their preferred PFA to manage their retirement savings
• Pension Fund Administrators (PFAs): Manage and invest retirement funds, maintain records, and process retirement benefits
• PenCom: Nigeria's pension regulator, oversees compliance and licenses PFAs
• Pension Fund Custodians: Hold and safeguard pension assets, execute investment transactions on PFAs' instructions

• Employee Information: Collect staff details including full names, dates of birth, PFA registration numbers, and salary structures
• Contribution Structure: Calculate exact contribution percentages, ensuring they meet the minimum 18% combined rate
• PFA Selection: Research and choose licensed Pension Fund Administrators registered with PenCom
• Compliance Check: Review PenCom guidelines and the Pension Reform Act requirements for your business size
• Documentation Setup: Prepare enrollment forms, contribution schedules, and group life insurance arrangements
• Internal Systems: Configure payroll to automatically deduct and remit pension contributions monthly

• Contribution Structure: Clear breakdown of employer (10%) and employee (8%) contribution rates
• Eligibility Criteria: Definition of eligible employees and participation requirements
• PFA Details: Names and contact information of chosen Pension Fund Administrators
• Payment Schedule: Specific timing and method for contribution remittances
• Vesting Rules: Terms for when benefits become fully owned by employees
• Withdrawal Conditions: Requirements for accessing retirement benefits under PenCom guidelines
• Benefits Formula: Calculation method for retirement payments and death benefits
• Amendment Provisions: Process for modifying plan terms within legal limits

A Retirement Plan differs significantly from a Stock Option Plan, though both are employee benefit schemes. While retirement plans focus on long-term financial security through mandatory pension contributions, stock option plans offer employees the opportunity to purchase company shares at predetermined prices.

• Purpose and Timeline: Retirement Plans provide guaranteed post-employment income through regulated pension schemes, while Stock Option Plans create potential investment returns through company ownership
• Legal Requirements: Retirement Plans are mandatory under Nigerian law for companies with 3+ employees, but Stock Option Plans are voluntary corporate incentives
• Fund Management: Retirement Plans must be managed by licensed PFAs with strict investment guidelines, while Stock Option Plans are administered internally by the company
• Risk Profile: Retirement Plans offer more stable, regulated returns, whereas Stock Option Plans carry market-based risks tied to company performance