The Director-General of the National Pension Commission (PenCom), Mrs. Aisha Dahir-Umar, has clarified that the proposed increase in the pension contribution rate applies only to employers, not employees. This clarification addresses widespread concerns and misinformation surrounding the planned adjustment.
Key Details of the Proposed Increase
Speaking at a stakeholders' forum in Abuja, Dahir-Umar explained that the proposed increment is strictly for the employer's share of the contribution. The current rate is 10% from the employer and 8% from the employee, totaling 18%. Under the proposed change, the employer's contribution would rise to 12%, while the employee's remains unchanged at 8%, making a total of 20%.
“The proposed increase is solely on the employer contribution. There is no plan to increase the employee contribution,” Dahir-Umar stated. She emphasized that the adjustment is aimed at enhancing retirement savings without burdening workers.
Rationale Behind the Policy
The PenCom DG noted that the decision follows extensive consultations with labor unions, employers, and other stakeholders. The objective is to improve the adequacy of pension benefits for retirees, given the rising cost of living and inflation. According to PenCom data, the average pension replacement rate is currently below 30%, which is insufficient for a dignified retirement.
“We want to ensure that retirees have enough savings to maintain their standard of living. The employer contribution increase is a step toward achieving that,” she added.
Reactions from Stakeholders
The Nigeria Labour Congress (NLC) welcomed the clarification, having earlier expressed concerns that employees might bear the brunt of the increase. NLC President Comrade Joe Ajaero said, “We appreciate PenCom’s assurance that workers will not be affected. However, we will monitor the implementation to ensure compliance.”
Employers, represented by the Nigeria Employers' Consultative Association (NECA), expressed mixed reactions. NECA Director-General Mr. Adewale-Smatt Oyerinde stated, “While we understand the need for higher contributions, we urge the government to consider the financial burden on businesses, especially small and medium enterprises.”
Implementation Timeline
Dahir-Umar disclosed that the PenCom board has approved the proposal, which now awaits legislative amendment to the Pension Reform Act. She estimated that the new rates could take effect by early 2027, pending parliamentary approval. The commission plans to engage lawmakers to expedite the process.
Impact on the Pension Industry
Industry analysts project that the increase could boost pension assets under management by approximately 15% annually, from the current N20 trillion to over N23 trillion within two years. This would provide more funds for infrastructure investment and economic growth. However, some experts caution that the burden on employers might lead to reduced hiring or automation.
PenCom reassured that it will continue to monitor the impact and adjust policies as necessary to balance the interests of all stakeholders.
