Nigerian employers spend N1.2trn on pension clearance in 12 years

Nigerian employers have spent a total of N1.2 trillion for pension clearance certification over the past 12 years.

The money covers unremitted pensions of their employees, as well as group life insurance made compulsory by the country’s pension law.

The Pension Reform Act (PRA) of 2014 mandates that employers with three or more employees to deduct and remit pension contributions into employees’ Retirement Savings Account(RSA), seven working days after payment of salaries.

Additionally, the law requires employers to provide Group Life Insurance and transfer legacy pension assets of their employees to licensed Pension Fund Administrators (PFAs).

The National Pension Commission (PenCom) in enforcing compliance, issues pension clearance certificate to employers, which enables them qualify for bid or participation in any federal government contract.

Section 16(6) d of the Public Procurement Act 2007 requires employers to fulfil their pension obligations towards their employees, as a condition bidding for any contract with Federal Government.

“The pension clearance certificate is a vital document confirming that employers have properly remitted pension contributions for their employees, underlining the importance of maintaining transparency and accountability in the pension system, industry analysts said.

Data from PenCom shows that, from 2012 to December 9th 2024, employers numbering 187,156 have been issued pension clearance certificates with total amounting remitted hitting N1, 144, 647, 803,941.56.

The Commission in a bid to enhance transparency and streamline business operations has introduced the e-Pension Clearance Certificate (e-PCC) application.

This automated system includes three key modules: the Employer Module, Pension Fund Custodian Module, and the PenCom Module. These modules are designed to simplify the application process for obtaining a Pension Clearance Certificate (PCC), a crucial document that confirms employers are meeting their pension obligations.

“Starting from 31 October 2024, both hard copy and online applications for the PCC will be processed simultaneously, with a full transition to electronic applications set for 1 April 2025, the Commission said.

“This digital shift aims to reduce turnaround times, foster greater transparency, and ultimately ease the process of doing business in Nigeria.” By embracing technology, PenCom is working to ensure a more efficient and effective pension system for both employers and employees, furthering the country’s commitment to pension reforms.

Key features of the e-pension clearance certificate applications include convenient online submission, real-tine tracking and update, reduced paperwork, print the certificate at your convenience, enhanced security and data protection, user-friendly interface, and improve turnaround time.

Omolola Oloworaran, director-general of PenCom said the Commission this year achieved a major milestone with the launch of the e-Application Portal for Pension Clearance Certificates (PCC) in October.

She said this initiative replaces the previous manual process, enabling companies to seamlessly apply for and receive PCCs online. “Since its deployment, we have issued over 38,000 PCCs, significantly enhancing ease of doing business and ensuring compliance.”

Oloworaran noted that the Pension Industry Shared Service Initiative is in advanced stages of implementation. This initiative will digitize pension contributions and remittances, ensuring seamless processing of contributions and resolving discrepancies caused by incomplete remittance details, the DG said.

“As we integrate technology across every aspect of the pension industry—ranging from data and identity management to seamless contributions, investment oversight, regulatory supervision, and service delivery—we are paving the way for a future where the Contributory Pension Scheme (CPS) becomes more accessible, reliable, and sustainable.”