Blog

Your one-stop career shop offering a wide variety of resources

HomeRetirement: How Much of Your Income Should You Contribute To Pension?Retirement: How Much of Your Income Should You Contribute To Pension?

Retirement: How Much of Your Income Should You Contribute To Pension?

Having retirement savings will help you live a comfortable life after you stop working. Therefore, it is necessary that you start saving as soon as you start earning.

How much should you save?

In some countries, saving for retirement is entirely up to the employee. But in some other countries like Nigeria, it is mandatory for all employers (both public and private) to enrol their staff under the Pension Contributory Scheme and the Pension Reform Act was established in 2004 to regulate it.

Prior to the enactment of the Act, pension schemes in Nigeria had many issues. The public sector was operating an unfunded defined benefits scheme and the payment of retirement benefits was done annually. While in the private sector, many employers excluded employees from pension schemes and many of the operating schemes were not properly funded and these led to the enactment of the Act. This scheme is designed to ensure that employees derive the benefit of being paid their pension adequately and as at when due upon retirement. The fund is regulated by the Pension Commission and the employer has no control over how your pension is invested and paid to you.  In 2014, some notable changes was made to the Pension Reform Act.

It is stipulated in the scheme that 8% of your (employee) Basic+Housing+Transport (BHT) allowance every month should go to pension contribution. Your employer deducts this amount from your salary at end of the month. Your employers also contributes 10% of your BHT every month and the total which is 18% is then transferred to your Retirement Savings Account at the end of the month. The savings account is opened in your name by your Pension Fund Custodian, the amount is then assessed by your Pension Fund Administrators who help you invest the money. This pension amount is not taxable as it is a statutory deduction (deductions made according to the law).

Employees have the right to contribute more than the stipulated 8% that means you can voluntarily contribute more if you wish to or if you have excess cash. However, any voluntary contribution made (as indicated above) shall be subject to tax at the point of withdrawal if the withdrawal is made before the end of 5 years from the date the voluntary contribution was made.

What do you think of this post?
  • Useful (0)
  • Boring (0)
Like what you just read? Share it with friends!
  •  
  •  
  •  
  •  
  •  
  •  
© 2016: CareerHubAfrica Blog | Easy Theme by: D5 Creation | Powered by: WordPress