Saving for retirement has become increasingly crucial as people lead more active lives during their retirement years. In Nigeria, the Contributory Pension Scheme (CPS) has played a vital role in enabling individuals to plan effectively for retirement. The pension reform in the country aims to establish a sustainable system that ensures a stable, predictable, and adequate source of retirement income for every Nigerian employee.
To achieve this goal, PenCom introduced the concept of Voluntary Contributions (VC), providing workers with the opportunity to increase their retirement income. VC allows employees to make additional contributions beyond the mandatory contributions set by law (10 percent from employers and 8 percent from employees).
Voluntary Contributions enable individuals to rapidly build up their pension savings during their working years, helping them meet their retirement income goals. Employees can determine the level of contributions required to reach their target income at retirement. Those with specific income targets can seek advice from their Pension Fund Administrators (PFAs) or utilize the “pension calculator” available on most PFAs’ websites.
Voluntary Contributions offer contributors the flexibility to decide the amount and frequency of their contributions. Contributions may be made monthly, quarterly, bi-annually, or annually. Contributors can start and stop their contributions at their convenience, and increase or reduce the amount as needed.