Can Employees Or Employers Waive/Opt Out Of The Contributory Pension Scheme Of PENCOM

Can Employees Or Employers Waive/Opt Out Of The Contributory Pension Scheme Of PENCOM

Can Employees Or Employers Waive/Opt Out Of The Contributory Pension Scheme Of PENCOM?  Daily Law Tips (Tip 574) by Onyekachi Umah, Esq., LLM. ACIArb(UK)

Unlike decades ago, now, there is serious regulation of pension and retirement benefits of employees in Nigeria. This includes public (government) employees and private (non-government) employees. A federal legislation has set a minimum percentage of an employee’s monthly salary that an employee and his employer must contribute towards the retirement benefits of the employee. The regulator of pension sector is the National Pension Commission (PENCOM) with it’s headquarters at 174 Adetokunbo Ademola Crescent, Wuse, Abuja and website at

In Nigeria, there is Contributory Pension Scheme, where each employer and his employee contribute a minimum percentage of the employee’s monthly salary into the Retirement Savings Account of the employee. An employer must contribute a minimum of ten percent of his employee’s monthly salary and the employee must contribute a minimum of eight percent of his monthly salary. The Retirement Savings Account is managed by a third party (Pension Fund Administrator) chosen by the employee while the contributed funds are kept by a Pension Fund Custodian chosen by the Pension Fund Administrator. An employee cannot access his retirement savings account unless he is retired and of 50 years of age or before any of these, he has been jobless for about four months or in some other specialized circumstances.

Now the question is, can an employee and his employer agree to waive, pause, stop or freeze monthly contributions of the employee or the employer towards the employee’s retirement benefit? Can an employee or employer opt out of the Contributory Pension Scheme?

First of all, it must be emphasized that Contributory Pension Scheme is not a policy of PENCOM rather a statutory provision (creation of law). It is enshrined (contained) in the federal law that regulates pension and retirement benefits in Nigeria, which is the Pension Reform Act, 2014. “The term “statutory provisions” means what it says, namely the provisions of a statute or, by extension, of a statutory instrument.” Per UWAIFO,J.S.C ( P. 20, paras. F-G). Quotation from the Supreme Court’s case of IDONIBOYE-OBU v. NNPC (2003) LPELR-1426(SC).

Contributory Pension Scheme is not only a statutory provision but a mandatory statutory provision, this is clearly seen in the diction of the law. The law says; “There is established for any employment in the Federal Republic of Nigeria, a Contributory Pension Scheme (in this Act referred to as “the Scheme”) for payment of retirement benefits of employees to whom the Scheme applies under this Act.” It further says that, “The Scheme established under subsection (1) of this section shall apply to all employees in the Public Service of the Federation, the Federal Capital Territory, States, Local Governments and the Private Sector ….” The following employees are exempted from the Scheme: “any employee who is entitled to retirement benefits under any pension scheme existing before the 25th day of June, 2004… but as at that date had 3 or less years to retire.” And also, Members of Armed Forces, Intelligence and Secret Services of Nigeria are exempted from the Scheme.

Mandatory statutory provisions are powerful, compulsory and forceful orders, requirements, directives, duties and rights provided by law. They are instructional and not discretionary. They are not buffet, where one can pick and drop rather consider them as bitter pills that one must chew or face the wrath of law. “… Iguh JSC @ page 96 stated that, where a special statutory provision is laid down, that procedure, ought to be followed and complied with unless it is such that may be waived.” Per IKECHI FRANCIS OGBUAGU ,J.S.C (P. 42, paras. B-E ) Quotation from the Supreme Court’s case of NWANKWO & ORS v. YAR’ADUA & ORS (2010) LPELR-2109(SC). And then, “[p]arties cannot waive compliance with or whittle down the requirement of statutory provisions which are clear and unambiguous. See Oviawe vs. Integrated Rubber Products Nig. Ltd (1997) 3 NWLR Pt 492 Page 126 referred to See Ibrahim vs. INEC (1999) 8 NWLR Part 614 Page 334.” Per JIMI OLUKAYODE BADA ,J.C.A ( Pp. 24-25, paras. F-B). Quotation from case of CAC v. REGISTERED TRUSTEES OF CELESTIAL CHURCH OF CHRIST (NIG) DIOCESE (2009) LPELR-11899(CA)

“In the recent case of M.C.S.N (Ltd/Gte) v. CONTINENTAL BROADCASTING SERVICE LTD (Unreported No. CA/L/574/2014) decided by this Court on 29th day of December 2015, this Court observed as follows: “Ipso facto, it is trite that where a Statute prescribes that a particular act be performed, failure to perform same will lead to whatever consequences that have been provided for under the Statute. In ADESANOYE v. ADEWOLE (supra) at page 22-23, the Supreme Court, Per TOBI, JSC held: “Where a Statute clearly provides for a particular act to be performed; failure to perform the act on the part of the party will not only be interpreted as a delinquent conduct but will be interpreted as not complying with the statutory provisions. In such a situation, the consequences of non-compliance with the statutory provision follow notwithstanding that the Statute did not specifically provide for a sanction. The Court can, by the invocation of its interpretative jurisdiction, come to the conclusion that failure to comply with the statutory provision is against the party in default.” See: also GAMBARI & Ors v. GAMBARI & Ors [1990] 5 NWLR (Pt. 152)…” Per, TIJJANI ABUBAKAR ,J.C.A ( Pp. 44-45, para. D). Quotation from the case of COUNCIL OF YABATECH v. AWONIYI (2016) LPELR-41393(CA).

Since Contributory Pension Scheme is a mandatory statutory provision of the Pension Reforms Act 2014, the Scheme cannot be waived, paused, stopped or dropped by employee, employer, both or even labour unions. Employees and employers have no discretion over the Scheme, rather they are bound to obey and comply. However, an employer can contribute beyond the minimum standards set by the Scheme. Any plan or attempt to go contrary to the Scheme is an offence and it is punishable with imprisonment for not less than one (1) year and or fine of N250, 000.00.


1. Sections 1, 2, 3, 4, 5, 7(1)(a) and (e), 8, 11, 17, 18 and 99 of Pension Reform Act, 2014.

2. The Supreme Court’s decision (on the issue that statutory provision must be observed where it is not meant to be waived) in the case of NWANKWO & ORS v. YAR’ADUA & ORS (2010) LPELR-2109(SC)

3. The Supreme Court’s judgement (on meaning of statutory provision) in the case of IDONIBOYE-OBU v. NNPC (2003) LPELR-1426(SC)

4. The Court of Appeal’s judgment (on the issue of statutory provisions and consequences for their violation) in the case of COUNCIL OF YABATECH v. AWONIYI (2016) LPELR-41393(CA).

5. The Court of Appeal’s judgment (on the issue that parties cannot waive statutory provisions) in the case of REGISTERED TRUSTEES OF CELESTIAL CHURCH OF CHRIST (NIG) DIOCESE (2009) LPELR-11899(CA)










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