The Pension System in Nigeria under the National Pension Commission (PenCom) is divided into two, the Defined Benefits Scheme (DBS) and the Contributory Pension Scheme (CPS).
This write up is an offshoot of a pictorial publication by the National Pension Commission (PenCom) on differences between the Defined Benefits Scheme (DBS) and the Contributory Pension Scheme (CPS). In this write up we will be comparing the DBS and the CPS based on Administration, Coverage, Funding, Pension Accounts and Insurance.
Administration
The DBS under PenCom is administered by the Pension Transitional Arrangement Directorate (PTAD), a Federal Government Agency, while the pension fund assets under the Contributory Pension Scheme (CPS) are privately managed by Pension Fund Administrators (PFAs) and kept in custody by Pension Fund Custodians (PFCs). The PFAs and PFCs are private pension operators licensed by the National Pension Commission (PenCom).
Coverage
The DBS covers pensioners existing prior to the enactment of the Pension Reform Act 2004 and employees exempted from the Contributory Pension Scheme (CPS).
i. Public servants working for the Federal Government of Nigeria
ii. Public servants working for the Federal Capital Territory, Abuja
iii. Public servants working or each of the 36 States of Nigeria
iv. Public servants working for all the Local Government Councils in Nigeria
v. Employees of private sector organizations in Nigeria, where there are three or more employees are mandatorily required to contribute while other employees and those in the informal sector are encouraged to voluntarily.
Funding
Funding for PTAD comes from the budgetary provisions by the Federal Government of Nigeria.
The CPS is funded through monthly contributions from the employees’ salaries and the contributions by the employer.
Individual Pension Accounts
There are no individual pension accounts under the DBS.
There are Individual Pension Accounts for each employee under CPS, each employee is required by law to open a Retirement Savings Account (RSA) in his/her name with a Pension Fund Administrator (PFA) of his/her choice. The RSA (which has a unique PIN), is for life regardless of transfer of service or change of employment.
Insurance Coverage
No insurance coverage under the DBS.
Under the CPS, the law mandates employers to have a Group Life Insurance policy for up to three times the employees’ Annual Total Emoluments.
Support PensionNigeria financially with N1,000 per Month HERE, or with any amount HERE
Empower us to do more independent analysis of the Pension Industry in Nigeria
Subscribe to PensionNigeria Daily News Broadcast on WhatsApp, just send “Subscribe” to 08160052802, PLEASE ensure you also save 08160052802 to your contacts as “PensionNigeria” to enable you receive the PensionNigeria News Broadcast.
Subscribe to PensionNigeria Daily Newsletter and get Today’s Top Pension News delivered straight into your email box every Evening.
If you have subscribed before and you still do not receive our Newsletter, please check your “Spam Folder” , if you find our Newsletter there, mark it as “NOT SPAM” or move it to your Inbox
Pension is Your Right,
An Insurance for Old Age
Follow PensionNigeria on Social Media LinkedIn Twitter Instagram Facebook YouTube