Nigeria: Private Sector Compliance with Pension Scheme Soars in First Half of 2024

In the first half of 2024, compliance with Nigeria’s Contributory Pension Scheme (CPS) surged as the National Pension Commission (PenCom) issued Pension Clearance Certificates (PCCs) to 30,728 organizations. This represents a significant 43.62% increase from the 21,395 PCCs issued during the same period last year.

According to a report obtained by The Nation, this rise in compliance indicates a marked improvement in private sector adherence to the CPS, surpassing the figures from previous years. The 30,728 PCCs issued from January to June 2024 have already exceeded the total number issued throughout 2023 (30,293) and the 26,556 PCCs issued in 2022. Each PCC remains valid until December 31 of the year it was issued, regardless of the issuance date.

PenCom began issuing PCCs in 2012 as part of the Pension Reform Act, 2014 (PRA 2014), which requires organizations with at least three employees to participate in the CPS. The PCC serves as proof of compliance with the PRA 2014 and is necessary for organizations seeking contracts or business with Federal Government Ministries, Departments, and Agencies (MDAs). Organizations must fully meet the requirements to obtain a PCC.

Requirements for Obtaining a PCC:

To qualify for a PCC, employers must ensure their employees have Retirement Savings Accounts (RSAs) with a Pension Fund Administrator (PFA) of their choice. Employers must also remit both employer and employee monthly pension contributions to Pension Fund Custodians (PFCs) within seven working days of salary payment. Additionally, employers with pre-existing pension schemes must transfer pension funds and assets to licensed pension operators and provide their staff with a Group Life Insurance Policy (GLI) covering at least three times the annual total emoluments of the employees.

Application Requirements:

Employers seeking a PCC must submit an application along with a certified list of employees as of the end of the last fiscal year, stamped by an authorized official. They must also provide certified rates of monthly pension contributions, evidence of remittances for the past three fiscal years (or since incorporation for newer organizations), evidence of transfer of pre-CPS pension funds, and proof of GLI coverage.

Application Process and Common Issues:

PenCom has designed a straightforward and transparent process for PCC applications, with processing typically completed within seven working days if all requirements are met. Common issues include under-remittance of contributions, insufficient GLI coverage, and inaccuracies in employee numbers or pension contribution records. Applicants are notified of any deficiencies and given the opportunity to correct them before a PCC is issued.

PenCom advises employers to apply directly for PCCs to avoid complications, as there is no cost for the certificate. The commission does not charge any fees, and employers are only required to remit pension contributions into employees’ RSAs.

PenCom updates a list of issued PCCs on its website daily, and any certificate not found on the site is considered invalid. The Bureau of Public Procurement (BPP) also verifies PCCs through an interface with PenCom.

The notable increase in private sector compliance with the CPS reflects the effectiveness of PenCom’s regulatory efforts and its commitment to maintaining a robust pension system.