Although the PRA 2014 does not allow a complete transition away from the CPS for most employers, it does permit the continuation of pre-existing gratuity or severance arrangements. In line with this provision, the National Pension Commission (PenCom) issued the 2017 Guidelines on Gratuity Benefits, enabling private sector employers to operate defined benefit (DB) gratuity schemes alongside the CPS, subject to annual actuarial valuation to ensure adequate funding. Furthermore, PenCom issued a framework on 13th September 2023 for the establishment of Additional Benefits Schemes (ABS) under the CPS, pursuant to Section 4(4)(a) of the PRA 2014. This framework effectively facilitates a transition toward a hybrid pension model, allowing employers to introduce supplementary benefits, either defined benefit or defined contribution, on a fully funded basis.

A hybrid pension scheme combines elements of both defined contribution (DC) and defined benefit (DB) systems. Under a DC scheme such as the CPS, investment and longevity risks are largely borne by employees. In contrast, DB schemes place these risks on employers. A hybrid arrangement shares these risks between both parties.

The recent initiatives by PenCom, including the reintroduction of gratuity for federal civil servants (equivalent to 100% of annual emolument for those with at least ten years of service, effective January 2026); the PenCare healthcare scheme for low-income retirees; and plans to implement the GMP, have signaled a practical and commendable transition toward a hybrid pension model. This development is significant, timely and commendable.

This article examines potential funding approaches for these defined benefit components and their implications for stakeholders.

Gratuity is a defined benefit paid as a one-time lump sumto an employee upon retirement or exit after a minimum period of continuous service. The funding approach for the newly approved Federal Government gratuity scheme has yet to be clearly defined. Typically, such schemes are non-contributory, with funding provided solely by the employer based on actuarial valuation of liabilities.

In practice, two primary funding models exist: Pay-As-You-Go (PAYG) and fully funded system. A clear understanding of these approaches along with Nigeria’s historical experience of pension schemes administration prior to the 2004 is essential in determining the most suitable modelfor reintroducing gratuity to Federal civil servants.Historically, Nigeria operated a PAYG system. While this model allows flexibility and immediate payment of benefits, it is highly vulnerable to demographic pressures, economic instability, and political interference. Factors such as an aging population, increasing life expectancy, and fluctuating workforce contributions often result in funding imbalances, leading to deficits and delayed payments. In contrast, fully funded systems accumulate and invest contributions during employees’ working years to finance future benefits. These systems offer greater long-term sustainability but depend heavily on investment performance, robust governance, and transparency. They are also exposed risks including market volatility, fund mismanagement, and manipulation of actuarial assumptions to present a more favorable financial picture.

Nigeria’s past reliance on largely unfunded (PAYG) defined benefit schemes resulted in substantial pension liabilities and arrears, prompting the introduction of the CPS. However, challenges persist under the CPS, including inadequate funding of accrued pension rights for pre-2004 employees, irregular remittance of contributions, and failure by some State Governments to implement pension laws in compliance with the PRA 2014.

Selecting a sustainable funding model for gratuity requires careful consideration of the issues discussed above. The reintroduction of gratuity within the CPS must be supported by legislative amendments to the PRA 2014 to prevent duplication of lump-sum benefits.

In March 2026, PenCom launched the Pension Industry Healthcare Initiative (PHI), known as PenCare. This initiative aims to provide affordable and quality healthcare coverage for low-income retirees under the CPS, many of whom lose employer-sponsored health insurance upon retirement. PenCom is expected to develop a comprehensive framework for accrediting healthcare providers, supervising Health Management Organizations (HMOs), and providing free or subsidized health insurance for the low-income retirees.  

PenCare is structured as a corporate social responsibility (CSR) initiative funded by PenCom and Pension Fund Administrators (PFAs), rather than directly from pension assets or Retirement Savings Accounts (RSAs). However, since PFAs and PenCom derive revenue from fees on assets under management (AUM), the initiative could indirectly result in higher fees or new charges, potentially reducing contributors’ retirement savings. This means current contributors could effectively subsidize retiree healthcare costs. Additionally, not all contributors may benefit from PenCare, raising equity concerns.

There is also a risk of overlap with the National Health Insurance Authority (NHIA), which already has a mandate to provide healthcare access, including for CPS retirees. Without effective coordination, PenCare could duplicate existing functions, leading to inefficiencies and increased healthcare system-wide costs.

The GMP, provided for under Section 84(1) of the PRA 2014, is a key mechanism for ensuring income adequacy in retirement. It serves as a safety net by guaranteeing a minimum benefit level within the CPS, thereby protecting retirees against poor investment returns and economic volatility.

The GMP functions as an “underpin” within the defined contribution framework (CPS), ensuring that benefits do not fall below a specified threshold (GMP), typically linked to a percentage of final salary at retirement date. Its implementation requires careful actuarial assessment to ensure cost-effectiveness and sustainability.

The Pension Protection Fund (PPF), established under Section 82 of the PRA 2014, is intended to finance the GMP and compensate for investment-related losses. It is funded through contributions from the Federal Government, PenCom, and pension operators, as well as investment income.

However, implementation of the GMP has been delayed, likely due to ongoing efforts by the Federal Government to settle accrued pension liabilities under the CPS. While initial funding of ₦107 billion for the PPF commenced in February 2025, additional resources are required for full implementation. Encouraging voluntary contributions and strengthening complementary welfare initiatives could reduce reliance on the GMP and ease pressure on the PPF over time.

Nigeria is already undergoing a gradual transition from a purely contributory pension system to a hybrid model, both in policy and practice. The introduction of gratuity schemes, healthcare support, and minimum pension guarantees reflects recognition that the CPS alone cannot fully meet retirees’ needs.

For this transition to be effective, State and Local Governments must also adopt similar reforms. In particular, the reintroduction of gratuity schemes across all tiers of government is essential to achieving a uniform and equitable pension system, as envisaged under Section 1(a) of the PRA 2014. Thus, a well-designed hybrid model would offer the best prospect for delivering sustainable and adequate retirement income for Nigerian workers.

Dr Pius Apere is an (Actuarial Scientist and Chartered Insurer), Chairman/CEO, Achor Actuarial Services Limited

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The National Pension Commission (PenCom) is conducting a one-time nationwide online verification and enrollment exercise for all active employees of treasury-funded Ministries, Departments and Agencies (MDAs) who were employed before June 30, 2004.

The exercise, which began on February 2, 2026, and is scheduled to end on July 31, 2026, is designed to capture accurate and complete data on eligible workers. This is expected to support the timely payment of their accrued pension rights under the Contributory Pension Scheme.

The initiative forms part of the Federal Government’s broader effort to address pension obligations carried over from the old Defined Benefit Scheme, which was replaced by the Contributory Pension Scheme in 2004.

Under Section 15(1) of the Pension Reform Act 2014, employees who transitioned to the new scheme are entitled to accrued pension rights representing benefits earned under the previous system. To fund these liabilities, the law provides for a Retirement Benefits Bond Redemption Fund domiciled with the Central Bank of Nigeria.

In a circular dated April 27, 2026, the Head of the Civil Service of the Federation, Didi Esther Walson-Jack, directed all treasury-funded MDAs to support the exercise. The directive stressed that verification is critical for determining the Federal Government’s outstanding pension liabilities and making appropriate budgetary provisions.

PenCom said the current exercise reflects a shift from earlier manual processes that were often hindered by incomplete records and delays. The commission has deployed a digital platform known as the Contributions and Bond Redemption Application (COBRA), designed to enable real-time data capture, validation and processing.

The platform incorporates multiple layers of verification, including biometric capture and cross-checking of employment records, aimed at improving data accuracy and reducing errors that could delay pension payments.

To ensure efficiency, the exercise is being implemented in phases. The first phase, which ran from February 2 to March 31, 2026, covered employees expected to retire between January 2027 and December 2029.

The second phase, currently underway from April 1 to July 31, 2026, targets employees scheduled to retire from January 2030 onwards.

PenCom said the phased approach is intended to enhance coordination, improve monitoring and ensure all eligible employees are captured within the timeline.

However, participation has remained below expectations, prompting a directive mandating full compliance by all treasury-funded MDAs.

Under the directive, MDAs are required to upload details of eligible employees on the COBRA platform, after which affected staff are to visit their respective Pension Fund Administrators with the necessary documents to complete the process.

Pension Desk Officers trained by PenCom have been assigned to coordinate the exercise within their organisations and guide employees through the process.

PenCom assured workers that participation would enable the proper computation of their accrued pension rights and help the Federal Government make adequate provisions for payment, ensuring seamless access to benefits upon retirement.

With the July 31 deadline approaching, the Federal Government has urged Permanent Secretaries and heads of MDAs to publicise the directive widely and ensure full participation.

Officials warned that failure to participate could complicate the processing of accrued pension rights and lead to delays in accessing retirement benefits.

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The seminar, hosted by the Nigeria Social Insurance Trust Fund in collaboration with the International Social Security Association, focused on the theme: improving inclusivity and access to social security services through clear and effective communication. It brought together stakeholders from across West Africa to explore ways of enhancing service delivery and public engagement.

Speaking at the event, Oloworaran commended the organisers for convening the dialogue and highlighted the Federal Government’s ongoing efforts to expand social protection. She noted that President Bola Ahmed Tinubu has shown commitment to social welfare by supporting vulnerable citizens through initiatives such as cash transfers, improved healthcare access, and the settlement of outstanding pension obligations.

The PenCom DG explained that while the Contributory Pension Scheme has built a solid institutional framework over the years, achieving real inclusion requires more than just expanding coverage. According to her, trust and understanding among contributors are critical, which is why the commission continues to strengthen stakeholder engagement, promote the Personal Pension Plan, and expand digital communication channels.

She emphasised that communication plays a central role in the success of pension reforms and service delivery, noting that policies and benefits can only be effective when contributors clearly understand and are able to act on them.

The engagement, she added, reflects PenCom’s broader commitment to building a more transparent, inclusive, and responsive pension system, where clear communication helps bridge gaps in access, foster trust, and support long-term growth in the sector.

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Speaking at a press conference convened by the Head of Civil Service of the Federation, Mrs. Didi Esther Walson-Jack, in Abuja yesterday, Oloworaran described the recently approved exit benefits as a significant step toward ensuring a more structured and dignified transition into retirement for public servants.

She emphasized that the new measures are designed to strengthen the pension system while addressing longstanding challenges faced by retirees. According to her, the reforms will enhance financial security and promote better post-service living conditions.

The PenCom DG also highlighted the ongoing one-off enrolment exercise, which is expected to improve the efficiency of accrued pension rights payments. The initiative aims to streamline processes and enable retirees to access their benefits more quickly and seamlessly.

In addition, Oloworaran unveiled new retiree-focused programs, including the PenCare Health Initiative. The scheme, a corporate social responsibility effort by the pension industry, is designed to provide healthcare access to low-income retirees under the Contributory Pension Scheme. Through a structured health insurance arrangement, the initiative seeks to improve access to affordable and quality healthcare in retirement.

She further disclosed plans for the implementation of the Minimum Pension Guarantee (MPG), describing it as a landmark policy that will ensure pensioners receive a guaranteed minimum income. The initiative is expected to address the issue of low pensions and strengthen Nigeria’s social protection framework.

Oloworaran also commended the Federal Government for releasing funds to clear outstanding pension liabilities, noting that the move underscores the administration’s commitment to the welfare, dignity, and financial security of Nigerian workers in retirement.

The latest developments signal a renewed push by stakeholders to reform Nigeria’s pension system and improve the overall well-being of retirees.

President Bola Ahmed Tinubu had in  Friday approved an upward review of welfare and incentive packages for civil servants, in a move aimed at improving staff motivation and enhancing earnings both in active service and after retirement.

According to the Head of the Civil Service of the Federation, Didi Walson-Jack, measures, which received the backing of the Federal Executive Council, will cover employees under the Consolidated Public Service Salary Structure (CONPSS) and the Consolidated Research and Allied Institutions Salary Structure (CONRAISS).

Walson-Jack, added that the updated special allowances will cut across all grade levels, ensuring that both junior and senior personnel benefit from the initiative. She added that nearly all entitlements captured in the Public Service Rules have been adjusted, including duty tour allowances, estacode, and book grants.

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Director-General of PenCom, Omolola Oloworaran, disclosed that the commission is aiming to achieve at least 85 percent coverage of Nigerian workers under the scheme. She spoke during a joint annual roundtable session with the leadership of the Trade Union Congress of Nigeria (TUC), part of ongoing stakeholder engagements to deepen transparency, trust, and collaboration in pension administration.

Oloworaran said the commission is deploying multiple strategies, including incentives and expanded outreach, to drive participation across both formal and informal sectors. A key focus is the newly rebranded Personal Pension Plan, previously known as micro pensions, designed to attract a broader segment of Nigerians, particularly those outside formal employment.

“We want a situation where at least 85 percent of Nigerian workers are on the scheme or have the intention to participate,” she said, noting that widening pension coverage remains central to PenCom’s reform agenda.

To boost grassroots adoption, PenCom has introduced accredited pension agents tasked with engaging Nigerians directly in markets, rural communities, and informal workplaces. Unlike Pension Fund Administrators (PFAs), which largely operate at corporate levels, these agents are expected to build trust and drive enrollment at the community level.

The initiative also creates a new business stream, particularly for fintech firms, as accredited agents can earn up to 40 percent of PFA fees on an annuity basis. According to Oloworaran, this model is expected to attract new entrants into the pension ecosystem and accelerate onboarding.

PenCom is also leveraging public sensitisation campaigns to increase awareness. During recent engagements around International Women’s Day, the commission recorded strong participation and growing interest, especially among women.

Despite these efforts, Oloworaran acknowledged that compliance within the formal sector remains a significant challenge. She stressed the need for stronger collaboration with labour unions to enforce compliance, particularly among employers who fail to remit pension contributions.

At the subnational level, pension adoption remains uneven, with only eight out of Nigeria’s 36 states demonstrating significant compliance. PenCom said it is intensifying engagements with state governments and labour organisations to improve adoption rates.

The commission also highlighted the flexibility of the Personal Pension Plan, which allows voluntary contributions for individuals, including provisions for parents to save on behalf of their children from birth.

Oloworaran expressed optimism about the future of the industry, noting that ongoing reforms, expanded participation channels, and increased stakeholder collaboration would position Nigeria’s pension system for stronger growth and sustainability.

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Operating under the umbrella of the Police Retired Officers Forum of Nigeria, the former officers held a peaceful march calling for their withdrawal from the Contributory Pension Scheme (CPS), which they labelled as exploitative and harsh.

They are also urging President Bola Ahmed Tinubu to give approval to the Police Exit Bill already passed by the National Assembly, which seeks to exempt police personnel from the existing pension arrangement.

According to them, other uniformed services such as the armed forces and intelligence agencies have been removed from the scheme, while police retirees continue to face what they described as financial hardship after years of service to the nation.

A spokesperson for the group said the demonstration was not politically driven but intended to highlight their conditions and push for improved welfare and respect for retired officers.

Security operatives were deployed across strategic locations in the capital during the protest, although the procession remained calm and orderly.

The retirees maintained that they would sustain their advocacy until their demands are addressed, insisting that the current pension framework is no longer workable or fair to former officers who served on the front lines of law enforcement.

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Donald is currently the Managing Director/Chief Executive Officer of Fidelity Pension Managers Limited.

He was elected by members of the Association to lead its Executive Committee and provide strategic direction for the pension industry.

The newly constituted Executive also includes Blessing Ogwu, MD/CEO of UBA Pensions Custodian Limited, as Vice President and Vice Chairman; Benjamin Okorie-Agidi, MD/CEO of TotalEnergies EP Nigeria CPFA Limited, as Treasurer; Ehis Uzenabor, MD/CEO of Shell Nigeria CPFA Limited, as Member and Chairman, Technical Committee; Aliyu Atiku, MD/CEO of NUPEMCO, as Member and Chairman, Legal, Regulatory and Ethics Committee; and Adeola Oyegbade, MD/CEO of GT Pension Managers Limited, as Member and Chairman, Branding and Communications Committee.

In his acceptance speech, Donald Onuoha thanked members for the confidence reposed in him, stating that he would continue to uphold the ideals of the pension industry while prioritising the interests of Retirement Savings Account (RSA) holders.

He added that he would work to deepen pension penetration, strengthen stakeholder engagement, and ensure the industry continues to contribute meaningfully to Nigeria’s economic development.

He also pledged to work closely with the Executive Committee and other stakeholders to sustain industry progress and drive initiatives that enhance transparency, trust, and efficiency across the pension ecosystem.

Speaking on the development, the Chief Executive Officer of PenOp, Anthonia Ifeanyi Okoro, said the emergence of the new leadership reflects the Association’s strong governance framework and commitment to continuity.

She noted that the smooth transition underscores the unity among operators and their shared objective of ensuring that the pension system delivers sustainable value to all Nigerians.

PenOp is the umbrella body for all licensed Pension Fund Administrators in Nigeria and remains committed to promoting a robust, transparent, and inclusive pension industry.

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Okoro, who has served in an acting capacity since her appointment last year, was formally confirmed by the pension operators as CEO.

She succeeds Oguche Agudah, who led the organisation for six years with dedication and impact.

Anthonia brings to the role a wealth of cross-sector experience spanning both the public and private sectors, with deep expertise in strategy execution, sectoral and organisational transformation, and large-scale programme delivery.

She has a proven track record of leading and embedding multi-organisational portfolios, driving growth, alignment, efficiency, and performance across diverse stakeholder groups.

Over the course of her career, she has successfully executed complex projects, programmes, portfolios, and change management initiatives valued at up to £5 billion, working with the UK Government and the City of London. Her ability to navigate complex systems and deliver measurable outcomes at scale with diverse and influential stakeholders is critical to the evolving needs of the Nigerian pension industry and to the strategic role PenOp plays.

In addition to her executive experience, Anthonia has served as a Director and Governor on the boards of several charities in the United Kingdom, demonstrating her strong commitment to governance, transformation, social impact, and sustainable development.

About PenOp

The Pension Fund Operators Association of Nigeria (PenOp) is an independent, non-governmental, non-political, and non-profit-making body.

PenOp was established to promote the operations of the pension industry, provide for self-regulation, and ensure that international best practices relating to the industry are observed by operators registered in Nigeria. It is the umbrella association for all the licensed Pension Fund Custodians, Pension Fund Administrators, and Closed Pension Fund Administrators (PFCs, PFAs, and CPFAs) operating in Nigeria.

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The Director-General of PenCom, Omolola Oloworaran, disclosed this during her welcome remarks at the first bi-annual roundtable discussion between PenCom and  the leadership of the Trade Union Congress of Nigeria (TUC).

According to Oloworaran, the achievement reflects the impact of ongoing reforms under Pension Revolution 2.0, a strategic initiative aimed at enhancing investment performance and safeguarding retirement savings against inflationary and currency risks.

As part of the reform agenda, the pension industry recently conducted a comprehensive review of its investment guidelines to strengthen long-term returns and preserve contributors’ wealth. The revised framework significantly expands the range of allowable asset classes, with increased exposure to real assets such as infrastructure investments, which serve as a natural hedge against inflation.

In addition, PenCom has introduced new investment instruments, including securities lending, repurchase agreements, and treasury bills, to deepen market participation, improve liquidity, and enhance portfolio yields.

The review acknowledged that rising inflation and exchange-rate volatility had previously eroded real pension returns, underscoring the need for a more diversified and resilient investment strategy. The updated framework is therefore designed to optimize returns while positioning pension assets to better withstand macroeconomic shocks.

“These reforms are already yielding results,” Oloworaran said, noting that pension fund returns are now approaching — and in some cases exceeding — inflation, representing a major turnaround after years of real value erosion.

PenCom is also working towards establishing a minimum pension guarantee through the Pension Protection Fund, supported by federal government contributions following the clearance of outstanding pension liabilities.

“This will enable us to establish a minimum pension for Nigerians, a critical step towards ensuring dignified retirement,” she stated.

Currently funded by PenCom, Pension Fund Administrators (PFAs), and Pension Fund Custodians (PFCs), the scheme will initially be implemented within the public sector before extending to private-sector workers as the funding base expands.

The regulator is also advocating for eventual mandatory contributions to strengthen the sustainability of the fund, a move that may require labour support amid anticipated resistance from employers.

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BY NKECHI NAECHE-ESEZOBOR—The President of the Trade Union Congress of Nigeria (TUC), Comrade Festus Osifo, has applauded the ongoing reforms by the National Pension Commission (PenCom), saying the measures have renewed workers’ confidence in the nation’s pension system and strengthened hopes of a dignified retirement for Nigerian workers.

Osifo gave the commendation during a bi-annual roundtable meeting with PenCom leadership, where he reaffirmed the Congress’ support for the commission’s reform agenda under Director-General Omolola Oloworaran.

From left: President Trade Union Congress, Festus Osijo; Director General National Pension Commission, Ms. Omolola Oloworaran; General Secretary Dr. Nuhu Toro and Commissioner Technical, Hafiz Kawa at the event

Osifo said the Congress stands firmly behind the reforms introduced by PenCom since Oloworaran assumed office as Director-General.

According to him, the commission has continued to demonstrate exceptional transparency and institutional credibility.

“We have watched the evolution of this Commission, and we can boldly say that PenCom stands as the finest institution in Nigeria today,” Osifo said.

Representatives of PenCom at the event 

“The transparency we see here gives the Nigerian worker hope that their sunset years will be dignified.”

The engagement organized by PenCom is part of the commission’s stakeholder engagement framework aimed at strengthening transparency, trust, and collaboration in the administration of Nigeria’s pension system.

Speaking on the achievements and ongoing reforms within the pension industry, Oloworaran said PenCom had successfully built a stable pension system since the introduction of the Contributory Pension Scheme in 2004.

She noted that pension funds have remained secure over the years.

“Since 2004 till today, we have not had any incident with pension funds, and we will not have any incidents because of the controls we have put in place,” she said.

The DG explained that the commission is now shifting focus from stability to visible impact through a wide range of reforms tagged Pension Revolution 2.0, described as the most significant reform package since the Pension Reform Act of 2004.

According to her, the reforms are designed to ensure that Nigerian workers retire with dignity and enjoy improved financial security.

A key component of the initiative, she disclosed, is the planned rollout of health insurance coverage for pension contributors, particularly low-income earners.

“We believe that wellbeing is very important for every Nigerian worker. What better way to ensure the wellbeing of workers than providing healthcare?” she said.

She added that PenCom would also soon begin implementation of the Pension Protection Fund, which will establish a minimum pension threshold for retirees, starting with the public sector.

Oloworaran said the move follows the clearance of outstanding pension obligations by the Federal Government and fresh contributions into the fund.

On pension coverage, Oloworaran expressed concern over low compliance among states, revealing that only eight out of the 36 states are fully compliant with the contributory pension scheme.

She said PenCom is intensifying engagement with state governments, labour unions, and relevant agencies to improve compliance.

The DG also highlighted efforts to expand pension participation beyond the formal sector through the newly rebranded Personal Pension Plan, formerly known as micro pensions.

The scheme, she explained, is designed to attract workers in the informal sector, small business owners, and even parents seeking to save for their children’s future.

To drive deeper inclusion, she said PenCom introduced Accredited Pension Agents to take pension services directly to markets, rural communities, and underserved groups.

According to her, the agents will work closely with Pension Fund Administrators (PFAs) and earn a share of management fees, creating new business opportunities, especially for fintech operators.

She expressed optimism that the reforms would significantly improve pension penetration and secure brighter prospects for the industry.

“I see brighter days ahead in the pension industry,” Oloworaran said.

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