Pension Commission Makes Changes to Guidelines under the Contributory Pension Scheme
The National Pension Commission (PenCom) has reviewed some key requirements to improve access to Voluntary Contributions and subsequently effected some changes in the Guidelines under the Contributory Pension Scheme (CPS) in the country. Please see below the major changes in the guidelines.
Timeline for withdrawal –
| S/N | Area impacted | Old Requirements | New Requirements |
| 1 | Timeline for withdrawal | Active/Mandatory contributors can only make withdrawals from their VC after the contributions have been retained in their Retirement Savings Account for a minimum of 2 years. | VCs can now be withdrawn after one year from the date of contribution for both mandatory and non-mandatory contributors. |
| Non-mandatory contributors, such as retirees, exempted contributors, political office holders, employees in an organization with an Approved Existing Scheme (AES), and foreigners can access their VC upon the expiration or termination of their contract. | |||
| 2 | Accessibility for non-mandatory contributors | VC for retirees, exempted contributors, political office holders, employees in an organization with an Approved Existing Scheme (AES), and foreigners, shall be retained in the RSA to be accessed at the expiration or termination of the contract. | Non-Mandatory Contributors can access 50% of their VC as contingent withdrawals before their employment/contract expires. |
| 3 | Tax implications | Tax deductions for mandatory contributors are only made on the income earned when withdrawal is within five years from the date of contribution. While tax deductions for non-mandatory contributors are applied on both the income earned and principal amount when withdrawal is within five years from the date of contribution. | For both mandatory and non-mandatory contributors, tax deduction is made on only the income earned when withdrawal is within five years from the date of contribution. |
Please note the following Guidelines under the Contributory Pension Scheme
- Mandatory Contributors: All active contributors under CPS
- Non- Mandatory Contributors: These includes
- Employees under Closed Pension Fund Administrators (CPFAs) and AES who were employed before June 2014 that are yet to transit to the CPS.
- Retired contributors under the CPS who secured another employment after retirement.
- Retired contributors under Defined Benefit Schemes including those retired under CPFAs and AES (who were employed before June 2014), who secured another employment after retirement.
- Categories of persons exempted by the Pension Reform Act 2014 i.e. Persons with 3 years left in service as at 25 June 2004, Judges (in line with Section 291 of the Constitution of the Federal Republic of Nigeria) and personnel of the Armed Forces, Intelligence and Secret Services.
- Foreigners working in Nigeria and making voluntary contributions under the CPS.
- Partners of Firms/Members of Religious Bodies and Non-Executive Directors of Companies.
