On July 1, 2014, President Goodluck Jonathan signed into law the New Pension Reform Act 2014 (PRA 2014) after 10 years performance of the old Pension Reform Act of 2004. The new law repeals the 2004 Pension Reform Act No. 2 and prescribes a 10-year jail term for pension thieves.

The Act does not specify a commencement date, however, Section 2 of the Interpretation Act CAP I23 of LFN 2010 stipulates that, where no date of commencement is contained in an Act, the commencement day shall be the day the Act was passed or signed into law. Therefore, the commencement date of the new Pension Act is 1st July, 2014.

The changes in the old pension Reform Act 2004, was aim to streamline the savings of funds towards retirement and the provision of funds after retirement, including availability of funds for the surviving beneficiaries of deceased employees whilst in service and retirees under the pension scheme within the guaranteed period.

  • The key highlights and salient point of the new Pension Act are detailed below:Minimum number of staff requirement for employer to take part in pension scheme has been increased to 15 from 5 employees as stipulated under the 2004 Act.
  • Section 8(1) of the New Act exclude/exempt employees that is 3 years or less to retirement from participating in the pension      scheme.
  • Minimum contribution from employer has been increased from 7.5% to 10%. The minimum level of contribution from employee was also increased from 7.5% to 8%. This means the two rate is no longer equal. TNew-Pension-Reform-Act-2014he greatest impact is the base upon which the monthly contribution is to be calculated. The definition of ‘monthly emoluments’ has been expanded to mean the total emolument as defined in the employee’s contract of employment provided it is not less than the total of the employee’s basic salary, housing and transport allowance.
  •  Group life policy’s benefit is now allowed to be paid to a name beneficiary of employee upon his death. In the Old Act (Act 2004), Group life policy’s benefits are paid into a deceased employee’s Retirement Savings Account (RSA) which makes it difficult for beneficiaries to access. Consequently, employers are required to ensure that their employees avail the insurer with the list of their beneficiaries to receive the proceeds of their company’s Group Life Policy under which insurance has been taken out for their lives whilst in service.
  •  Voluntary contributions that is withdrawn within five years are taxable in the hands of the employee
  •  The 2014 Act also empowers PenCom, subject to the fiat of the Attorney General of the Federation, to institute criminal proceedings against employers who persistently fail to deduct and/or remit pension contributions of their employees within the stipulated time.
  •  In the event of loss of jobs (where an employee disengages from employment or is disengaged), the new Act reduces the waiting period for accessing benefits from six months to four.
  •  The Pension Reform Act 2014 makes provision that would compel an employer to open a Temporary Retirement Savings Account, TRSA, on behalf of an employee that failed to open an RSA within three months of assumption of duty.
  •  The Act also allows an employer to pay additional payments benefits to employee upon retirement OR can elect to take full responsibility of the contribution (that is, bears the total pension contributions of its employees). In that case, the Contribution shall not be less than 20% of the employee’s monthly emolument.


  • Employers are required to take up Group Life Insurance policy on behalf of their employees for a minimum of three times the annual total emolument of the employee.
  • Employee is free to utilize the amount on their RSA for either programmed withdrawal or to purchase an annuity from an insurance company.
  • The ACT still allows employer with less than the minimum staff requirement (prescriptive 3 employees) and self-employed persons to participate in the pension scheme under separate guidelines issued by PenCom. However, the Act is silent on the applicability of the Scheme to private organizations with more than 3 but less than 15 employees.

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