In short: the employee contributes at least 8% and the employer at least 10% of the employee’s monthly basic, housing and transport. The employer remits both, within 7 working days of paying salaries, into each person’s Retirement Savings Account with their chosen Pension Fund Administrator.
Who must contribute
Under the Pension Reform Act 2014, employers with three or more employees must run the contributory pension scheme for their staff. Each employee opens a Retirement Savings Account (RSA) with a Pension Fund Administrator (PFA) of their choice. Smaller employers and self-employed people can join voluntarily.
How much, and on what
| Who | Minimum | On |
|---|---|---|
| Employee | 8% | Basic + housing + transport |
| Employer | 10% | Basic + housing + transport |
For someone on basic ₦250,000, housing ₦125,000 and transport ₦75,000 a month, the base is ₦450,000: the employee contributes ₦36,000 and the employer ₦45,000, a total of ₦81,000 into their RSA each month. An employer may also choose to pay the whole contribution itself, as long as the total is at least 20%.
Paying it on time
- Deduct the employee’s 8% from their pay.
- Add the employer’s 10%.
- Remit both to each employee’s PFA, through its custodian, within 7 working days of paying salaries, with a schedule showing each person, their PIN and the amounts.
Late payment attracts a penalty of at least 2% of the amount for each month it is late, on top of the contributions themselves.
Group life insurance
Employers must also keep a group life insurance policy for their staff, worth at least three times each person’s total yearly emoluments, and pay the premiums on time.
How pension affects PAYE
The employee’s contribution is taken off before income tax is worked out, so it lowers their tax. See the worked example in how PAYE is calculated.
Keeping it right every month
Keelsum’s payroll works out both contributions on basic, housing and transport for each person, shows the employee’s part on the payslip, and posts the amounts owed to your books until they are paid.
This guide is general information as we understand the rules in 2026, not legal advice. Check current requirements with the National Pension Commission (PenCom) or your adviser.