How to Calculate Pension from Salary in Nigeria
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In order to ensure that every retiree is financially independent at
retirement, the Pension Reform Act 2014 reviewed upwards, the minimum
rate of pension contribution from 15 percent to 18 percent of monthly
emolument which is monthly basic salary, transport allowance and
housing allowance. Under the Pension Reform Act 2014, 8 percent will
be contributed by the employee and 10 percent by the employer.
(adsbygoogle = window.adsbygoogle || []).push({});
History of the Nigerian Pension Scheme
Up until the year 2000, the combined pension contribution rate was
7.5% and was subject to a maximum limit of N3, 600 per annum. In 2001,
the contribution rate was increased to 10% and subject to a maximum
contribution of N52, 800 per annum. This was until 2004 where with the
introduction of the Pension Reform Act, it was required that a
combined rate of 15% was to be contributed to an employee’s pension
account without any limit as to amount.
(adsbygoogle = window.adsbygoogle || []).push({});
Under the Pension Reform Act 2014 which sought to repeal the Pension
Reform Act 2004 (as amended), all employees to whom the scheme applies
are to open a Retirement Savings Account with a Pension Fund
Administrator (PFA) of their choice. The contributory pension scheme
under the Pension Reform Act, 2014 is for all employees in the public
service of the Federation, Federal Capital Territory, and the private
sector with a minimum of three employees.
The Contributory Pension Scheme requires pension funds are to be
privately managed exclusively by licensed Pension Fund Administrators
(PFA). The main functions of the Pension Fund Administrators are
to:Open Retirement Savings Account (RSA) for employees
Invest and manage pension fund assets
Payment of retirement benefits
Account for all transactions relating to the pension funds under their
management.
The current pension scheme is applicable to employers with 3 or more
employees. Under the previous Pension act (Pension Reform Act 2004),
only employers with a minimum of 5 employers were required. Under the
Pension Reform Act 2014, the total rate of contribution increased from
15% of monthly emolument (being 7.5% each by the employer and the
employee) to 18% with a minimum of 10% by the employer and a minimum
of 8% by the employee.
(adsbygoogle = window.adsbygoogle || []).push({});
The Reform Act also changed the base upon which the monthly
contribution is calculated. This is known as total emoluments which
shall not be less than a total sum of basic salary, housing allowance
and transport allowance (BHT) as may be defined in the employee’s
contract of employment.
According to Nigeria Pension Commission, employees are required to
contribute a minimum of 8% of the sum of his basic salary, housing
allowance, and transport allowance. The employer, however, is required
to contribute a minimum of 10% of the same sum.
The amount contributed by the employee (8% of BHT) is also tax
exempted (tax will not be deducted on it). When calculating the 8%
required to be paid by the worker, you only need to take into account
your Basic + Housing + Transport (BHT) allowance and not the whole
month’s salary. This is also the same for the employer who pays a
minimum of 10% of the same sum. This means that at the end of each
month, at least 18% (your 8% and employer’s 10%) will go to your
Retirement Savings Account.
How to Calculate Pension from Salary in Nigeria
So when calculating the salary of a Nigerian worker, with a basic
salary of N50, 000, transport allowance of N30, 000 and housing
allowance of N20, 000. The contribution of this worker is 8% of
(N50000 + N30, 000 + N20, 000) which is 8% of N100, 000 equals to NN8,
000
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The employer of this worker then contributes 10% of N100, 000 which is N10, 000
This worker’s pension contribution per month is N18, 000
The pension contribution scheme exists so that every Nigerian worker
is guaranteed to receive the pension they deserve upon retirement. The
Pension Contribution Scheme is regulated by the Pension Commission and
thus designed in such a way that your employer has no say in how your
pension should be invested and paid to you.
Many people want to know if they can contribute more than the required
8% to their pension fund. This is very possible. A worker can
contribute more than just 8%, and an employer can also contribute the
whole 18% for the worker.
If a worker also has a huge amount of money he or she wants to drop
into the account at once, s(he) is free to do so. Voluntary
contributions such as this however are taxable upon withdrawal if the
withdrawal is made less than five years after the contribution was
made.
When a worker reaches the age of 50, you can decide how the money is
paid to you. Below are a few options available to you:
(adsbygoogle = window.adsbygoogle || []).push({}); Withdraw money on a
monthly or quarterly basis
Get paid monthly or quarterly by the National Insurance Commission if
you purchase life annuity
Withdraw a huge amount as long as there is enough money left to be
withdrawn later in the future (the lump sum initially withdrawn should
be from 25 to 50% of the money in your retirement account)
A worker can be paid 25% of the money from his or her retirement
savings account if he or she was fired or lost job. However, this is
after six months has passed and the worker is still unable to find
another job. After six months, the worker gets 25%, after which he or
she cannot access the rest until retirement age.
Other valid grounds for withdrawal from the pension savings account
before one is 50 includes:based on the decision from a qualified
physician who states that you are no longer capable (mentally or
physically) to carry out your functions at work:due to a permanent
disability, be it of your mind or your body;
before you are 50 but in accordance with your employer’s terms and conditions.
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In order to ensure that every retiree is financially independent at
retirement, the Pension Reform Act 2014 reviewed upwards, the minimum
rate of pension contribution from 15 percent to 18 percent of monthly
emolument which is monthly basic salary, transport allowance and
housing allowance. Under the Pension Reform Act 2014, 8 percent will
be contributed by the employee and 10 percent by the employer.
(adsbygoogle = window.adsbygoogle || []).push({});
History of the Nigerian Pension Scheme
Up until the year 2000, the combined pension contribution rate was
7.5% and was subject to a maximum limit of N3, 600 per annum. In 2001,
the contribution rate was increased to 10% and subject to a maximum
contribution of N52, 800 per annum. This was until 2004 where with the
introduction of the Pension Reform Act, it was required that a
combined rate of 15% was to be contributed to an employee’s pension
account without any limit as to amount.
(adsbygoogle = window.adsbygoogle || []).push({});
Under the Pension Reform Act 2014 which sought to repeal the Pension
Reform Act 2004 (as amended), all employees to whom the scheme applies
are to open a Retirement Savings Account with a Pension Fund
Administrator (PFA) of their choice. The contributory pension scheme
under the Pension Reform Act, 2014 is for all employees in the public
service of the Federation, Federal Capital Territory, and the private
sector with a minimum of three employees.
The Contributory Pension Scheme requires pension funds are to be
privately managed exclusively by licensed Pension Fund Administrators
(PFA). The main functions of the Pension Fund Administrators are
to:Open Retirement Savings Account (RSA) for employees
Invest and manage pension fund assets
Payment of retirement benefits
Account for all transactions relating to the pension funds under their
management.
The current pension scheme is applicable to employers with 3 or more
employees. Under the previous Pension act (Pension Reform Act 2004),
only employers with a minimum of 5 employers were required. Under the
Pension Reform Act 2014, the total rate of contribution increased from
15% of monthly emolument (being 7.5% each by the employer and the
employee) to 18% with a minimum of 10% by the employer and a minimum
of 8% by the employee.
(adsbygoogle = window.adsbygoogle || []).push({});
The Reform Act also changed the base upon which the monthly
contribution is calculated. This is known as total emoluments which
shall not be less than a total sum of basic salary, housing allowance
and transport allowance (BHT) as may be defined in the employee’s
contract of employment.
According to Nigeria Pension Commission, employees are required to
contribute a minimum of 8% of the sum of his basic salary, housing
allowance, and transport allowance. The employer, however, is required
to contribute a minimum of 10% of the same sum.
The amount contributed by the employee (8% of BHT) is also tax
exempted (tax will not be deducted on it). When calculating the 8%
required to be paid by the worker, you only need to take into account
your Basic + Housing + Transport (BHT) allowance and not the whole
month’s salary. This is also the same for the employer who pays a
minimum of 10% of the same sum. This means that at the end of each
month, at least 18% (your 8% and employer’s 10%) will go to your
Retirement Savings Account.
How to Calculate Pension from Salary in Nigeria
So when calculating the salary of a Nigerian worker, with a basic
salary of N50, 000, transport allowance of N30, 000 and housing
allowance of N20, 000. The contribution of this worker is 8% of
(N50000 + N30, 000 + N20, 000) which is 8% of N100, 000 equals to NN8,
000
(adsbygoogle = window.adsbygoogle || []).push({});
The employer of this worker then contributes 10% of N100, 000 which is N10, 000
This worker’s pension contribution per month is N18, 000
The pension contribution scheme exists so that every Nigerian worker
is guaranteed to receive the pension they deserve upon retirement. The
Pension Contribution Scheme is regulated by the Pension Commission and
thus designed in such a way that your employer has no say in how your
pension should be invested and paid to you.
Many people want to know if they can contribute more than the required
8% to their pension fund. This is very possible. A worker can
contribute more than just 8%, and an employer can also contribute the
whole 18% for the worker.
If a worker also has a huge amount of money he or she wants to drop
into the account at once, s(he) is free to do so. Voluntary
contributions such as this however are taxable upon withdrawal if the
withdrawal is made less than five years after the contribution was
made.
When a worker reaches the age of 50, you can decide how the money is
paid to you. Below are a few options available to you:
(adsbygoogle = window.adsbygoogle || []).push({}); Withdraw money on a
monthly or quarterly basis
Get paid monthly or quarterly by the National Insurance Commission if
you purchase life annuity
Withdraw a huge amount as long as there is enough money left to be
withdrawn later in the future (the lump sum initially withdrawn should
be from 25 to 50% of the money in your retirement account)
A worker can be paid 25% of the money from his or her retirement
savings account if he or she was fired or lost job. However, this is
after six months has passed and the worker is still unable to find
another job. After six months, the worker gets 25%, after which he or
she cannot access the rest until retirement age.
Other valid grounds for withdrawal from the pension savings account
before one is 50 includes:based on the decision from a qualified
physician who states that you are no longer capable (mentally or
physically) to carry out your functions at work:due to a permanent
disability, be it of your mind or your body;
before you are 50 but in accordance with your employer’s terms and conditions.
(adsbygoogle = window.adsbygoogle || []).push({});
(adsbygoogle = window.adsbygoogle || []).push({});
jQuery(document).ready(function( $) { $.post(
'https://nigerianfinder.com/wp-admin/admin-ajax.php', {action:
'mts_view_count', id: '289521'}); });
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