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The National Pension Commission (PenCom) has unveiled plans to introduce dedicated funding mechanisms for state pension bureaus as part of efforts to strengthen pension administration and improve compliance with the Contributory Pension Scheme (CPS) across Nigeria.
The proposed initiative is expected to provide sustainable financial support for state pension agencies while encouraging state governments to fully implement the CPS and improve retirement security for public sector workers.
PenCom Director-General, Omolola Oloworaran, announced the plan during the 2026 Consultative Forum for States, the Federal Capital Territory (FCT), and Licensed Pension Fund Operators, held in Lagos.
According to her, the Commission is exploring practical ways to create sustainable revenue streams for state pension bureaus after receiving feedback on the funding and operational challenges limiting their effectiveness.
“We have listened to their concerns, and they have made valid points. We will explore ways to create income streams for state pension bureaus. While the solution may not be exactly as proposed, we are committed to introducing measures that will strengthen their operations,” Oloworaran said.
PenCom Seeks Improved State Compliance
The announcement comes amid growing concerns over the slow adoption of the Contributory Pension Scheme by state governments.
PenCom disclosed that only eight of Nigeria’s 36 states have fully implemented and are operating the CPS framework, describing the current level of compliance as unsatisfactory.
Expressing concern over the pace of implementation, Oloworaran called on state governors to demonstrate greater commitment to protecting the retirement benefits of their employees.
“I am not satisfied with where we are today. If I were to assess compliance, I would still rate it as an ‘F9.’ Only eight states have fully complied with the Contributory Pension Scheme. There must be stronger political will. Governors need to prioritise the long-term welfare of their workers by ensuring every state adopts the CPS,” she said.
Warning Over Unremitted Pension Contributions
PenCom also raised concerns about practices in some states where pension contributions deducted from workers’ salaries are retained in government accounts instead of being remitted into individual Retirement Savings Accounts (RSAs).
According to the Commission, the practice exposes workers’ retirement savings to significant financial and governance risks.
Oloworaran warned that keeping pension deductions in state government accounts could lead to mismanagement or diversion of funds, particularly during changes in political administration.
“In my opinion, deductions from employees’ salaries should never be kept in a state government account. An incoming administration may not fully understand the purpose of those funds and could redirect them elsewhere. Such practices increase pension liabilities and create long-term sustainability challenges. PenCom will continue engaging affected states to discontinue this approach,” she stated.
Pension Reform Act Under Review
The Commission also revealed that discussions are ongoing with organised labour, the National Assembly and other stakeholders on proposed amendments to the Pension Reform Act (PRA).
Among the issues being considered is an upward review of statutory pension contribution rates to reflect prevailing macroeconomic conditions and strengthen the sustainability of Nigeria’s pension system.
“We are actively consulting with all relevant stakeholders, including organised labour and the National Assembly, on the review of the Pension Reform Act. While contribution rates are expected to increase, any changes will only be implemented after broad stakeholder engagement and consensus,” Oloworaran explained.
Lagos Reaffirms Commitment to Pension Reforms
Also speaking at the forum, the Director-General of the Lagos State Pension Commission (LASPEC), Babalola Obilana, who represented the Lagos State Head of Service, Bode Agoro, reaffirmed the state’s commitment to effective pension administration.
He said Lagos remains focused on ensuring prompt remittance of pension contributions, timely payment of retirement benefits and continuous institutional reforms to strengthen pension governance.
Strengthening Nigeria’s Pension System
PenCom reiterated that nationwide implementation of the Contributory Pension Scheme remains essential to reducing unfunded pension liabilities and ensuring workers receive their retirement benefits promptly.
Before the introduction of the CPS, Nigeria operated an unfunded Defined Benefit Scheme for public sector employees, which relied on government budgetary allocations and resulted in significant pension arrears and delayed payments.
The enactment of the Pension Reform Act 2004, later revised as the Pension Reform Act 2014, established the Contributory Pension Scheme to create a more sustainable and transparent pension system.
The Commission noted that the annual Consultative Forum continues to serve as an important platform for collaboration among PenCom, state governments and pension industry stakeholders, helping to improve policy implementation, strengthen institutional capacity and align sub-national pension administration with national standards.
Through its proposed funding initiative and ongoing policy reforms, PenCom aims to accelerate nationwide CPS adoption, enhance pension governance and build a more resilient retirement system for Nigerian workers.
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