Types Of Pension Scheme In Nigeria

There are numerous pension programs in Nigeria to consider before to retirement, ranging from compulsory to optional and micro. In today’s society, a pension is a must-have for all employees, as many struggle to save money during their working years and end up with nothing to fall back on in retirement. This is why pensions are crucial and have been made mandatory by the Nigerian government. Pension is a form of financial insurance, and there are various sorts of pension programs in Nigeria to pick from based on your objectives.

Types of pension schemes in Nigeria

1. Contributory pension scheme

Employees in both the private and public sectors must participate in the contributing pension program. This scheme requires you to own a Retirement Savings Account (RSA). In addition, that account receives a certain amount each month, which is approximately 15% to 20% of your salary, and contributions are automated.

Although RSA is quite similar to traditional savings accounts in that they both store money, with RSA, your fund manager invests your money, allowing it to grow. In the long run, they protect your pension funds against inflation. Read more about PenCom, the institution in charge of Nigeria’s contributory pension program.

2. Voluntary contributions scheme

Aside from the amount deducted from your account for your RSA, you can choose to contribute an additional amount. This is known as a voluntary contribution program, and it is much more flexible than the fixed RSA quota. Basically, you can contribute monthly, weekly, quarterly, or even biannually. All you have to do is inform your employer, and they will do the rest.

3. Micro pension scheme

The micro pension program was implemented in 2014 to provide for self-employed persons and business owners. Essentially, it provides additional flexibility for dealers, professionals, entrepreneurs, and self-employed individuals who do not qualify for the pension scheme due to a lack of work. However, it also adheres to the core premise of you contributing a set amount to your retirement savings account.

4. Cross border pension scheme

The cross-border pension program, as the name implies, is for people who live outside of the country yet want to contribute to the pension scheme. Essentially, like other plans, they own a Nigerian RSA and invest a portion of your income there for retirement. Finally, the cross-border pension program is a smart idea if you want to return to Nigeria in the future.

5. Retirement Plan

This plan is similar to the pension contributory scheme in that it focuses on pensioners. While you save, your fund manager will invest the funds on your behalf in secured bonds. This also helps the money grow to fight inflation; with a retirement plan, you can receive your pension monthly, quarterly, or on a regular basis.

Essentially, they allow you to pick how they pay your money and collect a lump sum at retirement. However, the lump sum must be less than N500,000. Finally, you must be 50 years or older to be eligible for this plan.

6. Institutional Pension fund management

This system was created for businesses and institutions. Essentially, the product is only offered to state governments, MDAs, corporations, and others. It varies from ordinary contributions in that it was supposed to be more appropriate for corporations rather than people.

Conclusion

In Nigeria, there are various sorts of pension programs, each with its own set of perks and disadvantages. However, in the end, it all comes down to what you actually require. As a result, make sure to conduct thorough research ahead of time and do not go in blind.

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