From compulsory pension to voluntary and micro, there are a good number of pension schemes in Nigeria to consider before retirement. In today’s world, pension is a needs must for every staff, as many find it difficult to save up money during their working years and end up with nothing to fall back to on retirement. Therefore, this is why pension is important and has been made compulsory by the Nigerian government. Pension is a way of financial insurance, and there are different types of pension schemes in Nigeria to choose from depending on your goals.
Types of pension schemes in Nigeria
The available types of pension schemes in Nigeria include:
1. Contributory pension scheme
The contributory pensions scheme is compulsory for staff across the private and public sectors. Basically, under this scheme, you are to own a Retirement Savings Account (RSA). In addition, that account receives a dedicated amount every month, which amounts to about 15% to 20% of your salary, and contributions are automatic.
However, although RSA is very similar to ordinary savings account being that they both save money, with RSA, your fund manager invests your money which helps it grow. In the long run, they protect your pension money from inflation. You can read more about PenCom, the organization in charge of the contributory pensions scheme in Nigeria.
2. Voluntary contributions scheme
Asides from the contribution they deduct from your account for your RSA, you can also choose to contribute an extra sum. This is called a voluntary contribution scheme, and it is very flexible, unlike the fixed RSA quota. Basically, you can choose to contribute monthly, weekly, quarterly, or even biannually. All you need to do is inform your employer and they would handle the rest.
3. Micro pension scheme
The micro pension scheme came into playback in 2014 to make provisions for self-employed individuals and businessmen. Basically, it allows more flexibility for traders, professionals, entrepreneurs, and self-employed individuals that do not qualify under the pension scheme for a lack of jobs. However, it also follows the basic principle of you contributing a certain quota to your retirement savings account.
4. Cross border pension scheme
Just like the name portrays, the cross-border pension scheme is for individuals who are out of the country but want to be a part of the pension scheme. Basically, just like other schemes, they own a Nigerian RSA and pay a certain quota of your income there against your retirement. Finally, the cross-border pension scheme is a good idea for those looking to return to Nigeria later in the future.
5. Retirement Plan
This plan is much like the pension contributory scheme as it targets retirees. While you save, your fund manager would invest the money on your behalf in secured bonds. Also, this helps the money grow to beat inflation, with a retirement plan, you can choose to receive your pension monthly, quarterly, or periodically.
Basically, they allow you to choose how you want them to pay your money and also collect a lump sum upon retirement. However, the lump sum must be below N500, 000. Finally, note that you can only access this plan after clocking age 50 years and above.
6. Institutional Pension fund management
This system was designed for companies and institutions. Basically, the product is only available to state governments, MDAs, corporates, and more. It differs from ordinary contribution in that they designed it to be more suited to corporations instead of individuals.
Bottom line
The different types of pension schemes in Nigeria differ from each other, with their advantages and disadvantages. However, in the end, it all boils down to what you really need. Therefore, ensure you do proper research ahead of time and don’t go in blindly.
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