Under the National Pension Commission’s rules for the Contributory Pension Scheme, Nigerian workers may access part of their pension savings before retirement, but only under specific regulated conditions.
Under the scheme, employers and employees contribute monthly to the worker’s Retirement Savings Account (RSA). These savings are primarily meant to provide financial stability at retirement. However, PenCom permits early withdrawal in certain situations.
One approved condition applies when a worker loses their job and remains unemployed for at least four months. In such cases, the individual is eligible to access up to 25 percent of the balance in their RSA.
To qualify, the worker must submit an official resignation or disengagement letter issued by their former employer.
PenCom’s Q4 2022 report showed that the commission approved the payment of ₦6.31 billion—representing 25 percent of RSA balances—to 9,966 contributors below age 50 who were disengaged and unable to secure another job within four months.
Beyond mandatory contributions, employees may also make voluntary contributions, which offer additional flexibility but come with specific rules. Under current PenCom guidelines, 50 percent of every voluntary contribution is classified as “contingent” and can be withdrawn, while the remaining 50 percent is locked until retirement. Withdrawals from the contingent portion are subject to income tax.
Informal-sector workers, including self-employed individuals or those working in very small businesses, are covered under the Micro Pension Plan. After at least three months of contributions, participants can withdraw up to 40 percent of their RSA savings, with the remaining 60 percent reserved for retirement.
Another option available to contributors is the use of RSA savings to fund the equity portion of a home mortgage. Under Section 89(2) of the Pension Reform Act 2014, eligible RSA holders may apply up to 25 percent of their pension balance to secure a mortgage. The contingent portion of voluntary contributions may also be used for this purpose.
While these options provide financial flexibility and support goals such as homeownership, experts caution that early withdrawals reduce retirement savings and may lead to smaller pension payments later in life. Workers who access both job-loss withdrawals and mortgage-equity funds may end up with limited funds during retirement
