Under the National Pension Commission’s rules for the Contributory Pension Scheme, Nigerian workers can access part of their pension savings while still in service, but only under specific conditions. Both employers and employees pay into a Retirement Savings Account (RSA) every month, and the funds are mainly meant to provide income after retirement.
However, one of the situations that allows early access is job loss. A worker who loses his job and remains unemployed for at least four months can apply to withdraw up to 25 per cent of the balance in his RSA.
To qualify, the individual must present a formal acceptance letter of resignation or disengagement issued by the employer.
PenCom’s Q4 2022 report showed that the commission “granted approval for the payment of N6.31 billion (being 25% of their RSA balances) to 9,966 RSA holders under the age of 50 years, who were disengaged from employment and unable to secure another job within four months.”
Beyond mandatory contributions, workers can also make voluntary pension contributions. These offer more flexibility but come with rules. Under current guidelines, half of any voluntary contribution is treated as “contingent” and can be withdrawn, while the remaining 50 per cent is held until retirement. Any withdrawal from the contingent portion attracts income tax.
PenCom’s guidelines state, “In line with Clause 3.13 above, (50%) of every amount lodged as Voluntary Contribution shall be treated as ‘contingent’ and available for withdrawal by a contributor while the balance of 50% shall be treated as ‘fixed’ until retirement date.”
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The micro pension plan also gives informal-sector workers, such as traders, artisans and other self-employed Nigerians, access to early withdrawals. After three months of consistent contributions, they may take out up to 40 per cent of their RSA balance, with the remaining 60 per cent reserved for retirement.
Another option under the law allows RSA holders to use part of their pension for home ownership. Under Section 89(2) of the Pension Reform Act 2014, eligible contributors may use up to 25 per cent of their RSA balance as equity for a mortgage. Those with voluntary contributions may also apply the “contingent” portion to this purpose.
While these options provide relief during job loss or help with long-term goals like buying a home, experts caution that early withdrawals reduce the amount available at retirement and may result in lower pension payments later in life.