The Steadfast Growth of Nigeria’s Pension System: A Five-Year Review of Death Benefits and Temporary Access
Nigeria’s pension system has shown remarkable growth and resilience over the past five years, providing crucial financial support to beneficiaries of deceased contributors and those temporarily out of employment. Between 2020 and 2024, a total of 45,976 beneficiaries received N274.34 billion in death benefits, reflecting a consistent upward trend in both the number of beneficiaries and the value of payouts. This steady increase underscores the growing importance of the pension system in providing financial security to families grappling with the loss of a breadwinner. The system’s ability to efficiently disburse these funds demonstrates its commitment to fulfilling its core mandate.
A detailed breakdown of the death benefit disbursements reveals a dynamic landscape within the pension system. In 2020, 6,731 beneficiaries received N31.09 billion. This figure climbed to N42.83 billion for 8,327 beneficiaries in 2021, demonstrating a significant year-on-year increase. The upward trend continued in 2022, with 10,631 beneficiaries receiving N59.6 billion, marking the highest number of beneficiaries during the review period. In 2023, 9,836 beneficiaries received N58.6 billion, while 2024 saw the highest value of death benefits paid out, with 10,451 beneficiaries receiving N82.22 billion. This consistent growth in both the number of beneficiaries and the value of benefits paid highlights the expanding reach and impact of the Nigerian pension system.
Beyond death benefits, the Nigerian pension system also provides crucial support to individuals facing temporary unemployment. The Contributory Pension Scheme (CPS) allows participants who are temporarily out of work to access a portion of their Retirement Savings Account (RSA) balance. This provision offers a vital safety net for individuals navigating periods of unemployment, helping them to meet their financial obligations while searching for new employment opportunities. Between 2020 and 2024, a total of 176,424 participants benefited from this provision, receiving a cumulative payout of N134.94 billion. This substantial figure underscores the significant role of the CPS in mitigating the financial hardship associated with unemployment.
The regulatory framework governing temporary access to RSA funds is designed to provide support while preserving long-term retirement savings. The Pension Act stipulates that individuals can withdraw up to 25% of their RSA balance after four months of unemployment, provided they have not secured new employment during that period. This provision strikes a balance between providing immediate financial relief and safeguarding future retirement security. By allowing access to a portion of their savings, the system helps individuals bridge financial gaps during unemployment while ensuring that a substantial portion of their retirement funds remains intact for their future well-being.
The overall performance of the Nigerian pension industry reflects robust growth and sound financial management. As of December 2024, the total pension assets under management reached N22.51 trillion, representing a significant 22.60% increase from N18.36 trillion in December 2023. This impressive growth reflects the increasing confidence in the Nigerian pension system and its ability to generate sustainable returns. The month-on-month growth of 1.15%, from N22.26 trillion to N22.51 trillion, further emphasizes the consistent positive trajectory of the industry. With a total of 10,582,299 registered Retirement Savings Account holders, the pension system is steadily expanding its coverage and impacting the lives of millions of Nigerians.
The investment strategies employed by licensed Pension Fund Administrators (PFAs) play a crucial role in the growth and stability of the pension industry. Federal Government securities remain a dominant investment choice for PFAs, providing a secure and stable foundation for the pension fund portfolio. Corporate debt securities and money market instruments also constitute significant components of the investment mix, offering diversification and liquidity. Investments in mutual funds provide further diversification and access to a broader range of investment opportunities. This strategic allocation of funds across different asset classes helps to mitigate risk and optimize returns, ensuring the long-term sustainability of the pension system. The robust regulatory framework governing PFAs ensures prudent investment practices and safeguards the interests of RSA holders.
