Pension compliance: contributions, group life and your PenCom certificate

In short: Under the contributory pension scheme, employer and employee both contribute a percentage of the employee's emolument to a Retirement Savings Account the employee controls. The employer must also hold group life insurance. The Pension Clearance Certificate is one of the most frequently demanded compliance documents in Nigerian procurement.

How the scheme works

The Pension Reform Act 2014 established a contributory scheme regulated by the National Pension Commission (PenCom). The structure matters because it explains why employers cannot hold the money:

• The employee opens a Retirement Savings Account (RSA) with a Pension Fund Administrator (PFA) of their own choosing.
• Assets are held by a separate Pension Fund Custodian, not by the PFA and not by the employer.
• The employer deducts the employee's share, adds the employer's share, and remits both to the custodian through the employee's PFA.
• The account belongs to the employee and follows them between jobs.

The employer is a conduit. Money deducted and not remitted is not a cash-flow cushion. It is someone else's pension, and interest accrues on late remittance.

Who must comply

Employers meeting the headcount threshold in the Act. Employers below it may still participate voluntarily, and some customers will expect it regardless of your size.

The threshold is low enough that most employers with a real payroll are in scope. Confirm your position rather than assuming.

What you contribute

Both sides contribute a minimum percentage of the employee's monthly emolument, where emolument is defined by the Act, typically built from basic salary, housing and transport. An employer may pay the whole contribution instead of deducting the employee's share, but may not pay less than the combined minimum.

Confirm the current minimum rates and the exact emolument definition with PenCom, because the definition drives the calculation and is where most assessments go wrong.

Setting it up

1. Register as an employer with PenCom and obtain your employer code.
2. Have each employee open an RSA with a PFA of their choice, and collect their RSA PIN. Do not choose the PFA for them.
3. Build the RSA schedule: employee name, RSA PIN, PFA, emolument, and each contribution amount.
4. Remit monthly, within the statutory window after salary payment, through the custodian.
5. Take out group life insurance for your employees, at the minimum cover the Act requires, and renew it annually.
6. Apply for your Pension Clearance Certificate, and renew it each year.

The Pension Clearance Certificate

This is the document tenders ask for. To obtain it you generally need evidence of registration, remittance schedules and receipts covering the relevant period, a valid group life policy, and confirmation that contributions are up to date.

It is issued for a defined validity period. Because it depends on a clean remittance history, you cannot fix a gap quickly. A missed month from last year still has to be settled, with any accrued interest, before the certificate is issued. Employers lose tenders on this specific point.

Group life insurance is separate

The group life requirement is an obligation in its own right. It provides a death-in-service benefit to the employee's beneficiaries and is insured, not funded from contributions.

Holding group life does not discharge the contribution obligation, and remitting contributions does not satisfy the group life requirement. Both are checked when the clearance certificate is assessed.

Ongoing obligations

• Remit within the statutory window each month, not whenever cash allows.
• Add new employees promptly, and collect the RSA PIN before their first payroll run.
• Keep remittance schedules and custodian receipts filed by month.
• Renew group life annually and keep the certificate.
• Renew the clearance certificate before it lapses.
• Handle leavers correctly: the account is the employee's and moves with them.

If you are behind on remittance

1. Quantify it precisely, month by month and employee by employee.
2. Expect to pay the outstanding contributions plus a penalty or interest for the delay.
3. Remit the arrears through the proper channel so each employee's account is actually credited.
4. Reconcile with the custodian's records, not only your own.
5. Then apply for the clearance certificate.

Do not settle arrears as a lump sum with no employee-level breakdown. Contributions have to land in named accounts.

Common mistakes

• Deducting the employee's share and remitting late, or not at all.
• Choosing the PFA on the employee's behalf.
• Calculating on basic salary only, when the definition is wider.
• Forgetting group life and failing the clearance assessment.
• Letting arrears sit, then needing a certificate inside a tender deadline.
• Not collecting RSA PINs at onboarding, which strands the first months' contributions.

Verify before you rely on this

Contribution rates, the emolument definition, the employer threshold, remittance windows, group life minimum cover and certificate validity all change. Confirm the current position with PenCom or a licensed PFA before you calculate or remit. This guide is not legal or financial advice.