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Frequently Asked Questions

WHEN WAS THE CONTRIBUTORY PENSION SCHEME SIGNED INTO LAW?

The Lagos State Pension Law which introduced the Contributory Pension Scheme (CPS) into the Lagos State Public Service was signed into law on 19th March, 2007. The Law was amended on 22nd February, 2019.

WHAT IS THIS PENSION SCHEME THAT STARTED IN APRIL, 2007?

The pension scheme is contributory. Your employer contributes and you will also make contributions. Deductions will be made from your salary and the Government/Parastatal or Agency will also make contributions into a Retirement Savings Account. These contributions will be invested on your behalf for purposes of providing you with a comfortable life in retirement. The contributory pension scheme is a fully funded scheme and is designed to ensure that everyone who has worked receives his/ her retirement benefit on exit from active service.

WHAT THEN IS THE OBJECTIVE OF THE PENSION REFORM LAW?

To ensure that every person that worked in the Lagos State Public Service receives his/her retirement benefits immediately they retire.

WHAT ARE THE OTHER OBJECTIVES OF THE SCHEME?

To assist employees in the Public Service develop a savings culture.
To establish uniform set of rules for pension administration and payment of retirement benefits in any employment in the Country.

WHAT IS THE COVERAGE OF THE LAW?

The provisions of the law are applicable to employees in the Public Service of the State, Employees of Local Government Councils, Tertiary Institutions and all Parastatals established by the State Government.

IS IT COMPULSORY FOR EVERY WORKER IN LAGOS STATE PUBLIC SERVICE TO JOIN THE SCHEME?

Yes, every employee must join the scheme (except judicial officers i.e. categories of people stated in section 291 of the Constitution of the Federal Republic of Nigeria).

WHAT HAPPENS IF THE PFC IS DISTRESSED?

Your contributions are very secure as the PFC does not hold the pension contributions in liquid cash in Banks. The PFA gives the PFC investment instructions which are carried out immediately. It is only a little cash that is left for liquidity purposes and the parent company of the bank is required to give bank guarantee for the funds held by its subsidiary.

WHAT HAPPENS IF THE PFA FAILS OR IS LIQUIDATED?

There is no cause for alarm. Your Pension contribution/Pension assets are not held by the PFA but the PFC. Liquidation of the PFA does not affect your savings.

DO I HAVE RIGHT TO CHANGE MY PFA?

Yes. You can change your PFA, once a year from one PFA to another without giving any reason. If you wish to make more than one change in a year, you must give reasons which have to be approved by the National Pension Commission in Abuja before change.

WHAT HAPPENS TO MY RSA WHEN I CHANGE JOBS?

The RSA remains with the PFA of your choice. You simply notify your new employer of the details of the PFA that manages your account and new contributions coming from your new employer will be sent to the custodian of the PFA. Your benefit for your years in service does not suffer any break due to changes.

MUST I LEAVE SERVICE BEFORE CAN HAVE ACCESS TO MY RSA?

Yes. As the name suggests, the account is an account for your retirement i.e exit from service. The balance in the account will be utilized to provide you with income in retirement or when you are out of the service from age 50.

BY COMING UNDER THE CONTRIBUTORY PENSION SCHEME WITH EFFECT FROM APRIL, 2007, WHAT HAPPENS TO THE BENEFITS FOR MY PAST YEARS IN THE LAGOS STATE PUBLIC SERVICE? IS THIS LOST OR HOW WILL I BE PAID?

No. The benefits are not lost. Before April, 2007 the employer was solely responsible for payment of gratuity and pension benefits of employees who retire. The scheme then was a defined benefit scheme otherwise known as the Pay as You Go scheme. For each individual, an exercise called an actuarial valuation exercise has been carried out to determine Government's liability to each employee in active service. This liability is a known figure and made up of gratuity and pension benefits as at the date of discontinuance of the Pay As You Go scheme and you will be given a Bond Certificate i.e a written acknowledgement of debt to you by the Lagos state Government for years of past service. This figure called accrued pension rights will be redeemed or paid into the RSA account of each individual at retirement. The date of discontinuance of the Pay As You Go scheme is 31st March, 2007.

CAN I COLLECT MY BENEFITS AT AGE 45 AS THE PUBLIC SERVICE RULES STATES THAT AT AGE 45, I CAN BE A PENSIONER?

No. The 2007 Pension Law (now amended) supersedes. Benefits in RSA account can be collected at age 50. However there is a provision under the new scheme that where an individual has been out of job for a period of 3 months and has been unable to secure another employment, a maximum percentage of 25% of the RSA balance can be collected as lump sum with balance receivable at age 50.

CAN I CONTRIBUTE MORE THAN INTO MY RSA?

Yes. You are allowed to make Additional Voluntary Contribution (AVC) to augment your RSA balance and thereby secure a more comfortable future for yourself at retirement. The AVC is deducted at source. It could be a percentage of your salary or could be a specified amount and instruction must be given to the pay office authorizing the deduction from your salary.

IF I MAKE ADDITIONAL VOLUNTARY CONTRIBUTION, CAN I WITHDRAW FROM THIS BEFORE AGE 50?

Yes you can collect the AVC contribution even whilst you are in service The only issue is that if you make withdrawals of AVC before a period of 5 years, you will pay tax on the contributions. It is therefore advisable that you draw the balance as a lump sum immediately on retirement.

CAN LAGOS STATE GOVERNMENT TAKE OR USE THE MONEY IN MY RSA FOR ANY PURPOSE?

The government cannot tamper with the pension funds in your RSA. The Government cannot have access to the account. It is your account.

HOW ARE MY CONTRIBUTIONS INVESTED?

The National Pension Commission has given guidelines on the investment of pension funds to ensure its security. LASPEC is also monitoring the investment to ensure security of your contributions.

IS THERE A STANDARD OR A GUARANTEED RETURN ON THE INVESTMENT?

At present, there is no standard return because proceeds of the investment which are in different instruments with different returns go into your account. It depends on the investment expertise of your PFA.

WHAT DO THE PFA &THE PFC GAIN BY MANAGING MY ACCOUNTS?

The PFA is entitled to receive commission which differs from one PFA to another but subject to a maximum monthly admin fee N100. Also, net asset based fees are shared between the PFA, PFC & the National Supervisory Body, PENCOM in Abuja.

WHAT OTHER BENEFITS ACCRUE TO ME BY HAVING A RETIREMENT SAVINGS ACCOUNT?

Part of the contributions in the RSA can be used as equity contribution for Mortgage purposes. This option is available only to first time House Owners.

WHAT IS MULTI FUND STRUCTURE?

This is a framework which aims to align your age with a risk profile. There are 4 Fund types - 3 active funds and 1 retirees Fund. Fund 1 has the highest risk appetite and contributors must write formally to opt for this fund.
Fund 11 óThis is a default fund for contributors aged 49 and below.
Fund 111 óThis is a default fund for contributors aged 50 and above
Fund IV- Retiree Fund. This fund has minimal exposure to risky investments.

WHO CAN I COMPLAIN TO IF I HAVE PROBLEM WITH MY PFA?

Lodge your complaint with the Lagos State Pension Commission (LASPEC)

WHO OR WHAT IS LASPEC?

LASPEC is the Commission set up by Lagos State Government to protect your interest under the new scheme. LASPEC is to register PFAs to sign up Lagos state workers and supervise their operations. They are to ensure that you regularly get your Statement of Account from the PFA; ensure that your contributions are secured and that you get paid your retirement benefits quickly.

WHAT IS THE RETIREMENT AGE UNDER THE LAGOS STATE PENSION REFORM LAW?

The law does not specify any retirement age. However, from age 50, you can opt to leave service and be able to access your RSA.

WHAT END OF SERVICE BENEFITS ARE AVAILABLE UNDER THE NEW SCHEME?

Programmed Withdrawal benefits or Annuity for Life
Lump sum benefit
Survivor benefits and disability

WHAT IS PROGRAMMED WITHDRAWAL BENEFIT?

A Programmed Withdrawal Benefit is the method by which an employee collects his retirement benefits in periodic sums (either monthly or quarterly) throughout the length of an estimated life span. It is a fund management product by Pension Fund Administrators who act as your fund manager in retirement. Payment of monthly pension will be made from the RSA. Investments continue to be made and you are entitled to receive Statements of payment made as pension and also see inflow of investment returns. In the event of death of retiree at any time, balance in the account is payable to beneficiaries of the Estate of the deceased.

WHAT IS ANNUITY FOR LIFE?

This is an Insurance product. It is a contractual arrangement between you and your appointed Annuity Service provider i.e. a life Insurance Company. The contract states that for a premium agreed by you, the Company promises to pay you pension, for as long as you live. You will instruct the PFA to transfer monies for payment of Pensions to the Insurance Company. That is the Premium. However, the annuity payment has a guaranteed minimum payment period of 10 years.

WHAT IS GUARANTEED PERIOD OF PAYMENT OF ANNUITY BENEFIT?

Guaranteed minimum period is 10 years. I.e. if death occurs before 10 years of collecting monthly pension, the balance of pension payable up to the 10th year is paid to named beneficiaries. However, if death occurs after the guaranteed period, no payment is made to the named beneficiary.

IN THE CPS SCHEME - MUST EVERY EMPLOYEE DRAW MONTHLY PENSION?

No. An employee will only draw monthly pension if the RSA balance is a minimum of a certain amount which presently is N550,000 and below. You will collect everything enbloc as one payment and the account will be closed.

IS LUMP SUM THE SAME AS GRATUITY UNDER THE OLD SCHEME?

No. Gratuity is a lump sum received under the old scheme. It is based on a known scale of benefits which is tied to length of service. Lump sum receivable under the new scheme is determined by the RSA balance. The Contributory Pension Scheme has a focus on monthly pension which is not expected to be less than 50% of your terminal basic salary, rent and transport allowances. When this is accommodated, then what is left can be received as lump sum. So there is no specific percentage that can be collected as lump sum.

WHAT IS SURVIVOR BENEFITS?

This is benefits payable to your beneficiary or next of kin in the event of death in active service. Your beneficiary is entitled to receive the RSA balance amount which is made up of accrued pension rights for past service before April, 2007,: contributions under the new scheme and accrued interest. Your dependants in addition are entitled to a death benefit which is equal to 320% of your annual total emolument. This death benefit is processed by the Insurance department of the Ministry of Finance for Public Servants and by agencies for Parastatals.

WHAT IS DISABILITY BENEFIT?

Where a doctor certifies you as unfit to continue to work, you are allowed to access your RSA balance.

WHEN WILL I HAVE ACCESS TO MONEY IN MY RSA?

At age 50 or retirement, whichever comes later. If however before age 50, you have to retire due to mental or physical incapacity, you can have immediate access to the balance in your RSA. You need a doctor's report to authenticate the level of incapacity.

IN THE EVENT OF DEATH, WHAT HAPPENS IF THE NEXT OF KIN (NOK) IN MY SERVICE RECORD DIFFERS FROM THE ONE I INDICATED IN THE FORM COMPLETED AND SUBMITTED TO THE PFA?

The NOK is the first contact in the event of death and is not necessarily a beneficiary to the Estate of a deceased person.

IS A WILL AN IMPORTANT DOCUMENT FOR MY NEXT OF KIN TO BE ABLE TO ACCESS MY RSA BALANCE?

Yes. It is essential. All workers are advised to seek legal opinion.

WHAT IF I DIE WITHOUT A WILL?

Then you create a lot of problems as your beneficiaries or Next of Kin will not be able to access your RSA balance until and unless they produce a Letter of Adrunistration that will be obtained from the Probate Registry. This may take some time to collect and you are therefore advised to put your house in order to avoid pains to your family in the event of unexpected death.

AT RETIREMENT OR AGE 50, WHAT IS THE PROCESS OR PROCEDURE TO FOLLOW FOR ME TO ACCESS MY RSA BALANCE?

6 months before planned exit; please ensure that you forward your retirement notification from place of employment to LASPEC.
Collect a pension form which has to be completed by you and your employer. The form will be returned to LASPEC from the Ministry /Agency
LASPEC will issue you a Bond Certificate for your accrued rights for past service with the State and redeem amount into your RSA account.
LASPEC will issue a Clearance Letter to confirm that you are an employee of the State. The Clearance Letter will be sent from LASPEC to the PFA You will complete documentation with the PFA and opt whether you want an annuity or a programmed withdrawal.

WHAT HAPPENS IF I JOIN SERVICE AFTER THE COMMENCEMENT OF THE CONTRIBUTORY PENSION SCHEME?

You can almost immediately begin to draw monthly pension from your RSA account. You do not need any documentation. All what is required is a letter from your Agency to state your entry and exit date. Your mode of exit will also be stated. LASPEC will immediately issue Clearance Letter to your PFA to allow you access to your RSA account, as you are not entitled to accrued pension rights for service under the discontinued scheme.

CAN I HAVE ACCESS TO MY ACCOUNT IF MY EMPLOYER HAS UNREMITTED CONTRIBUTIONS THAT HAS NOT BEEN CREDITED INTO MY RSA?

No, you cannot. All contributions must be domiciled into your Retirement Savings Account before you can be allowed to access the account.