States, Private Firms Continue To Avoid Pension Remittances Despite N15bn Fines

Despite up to N15 billion in monetary sanctions imposed on employers in the private sector for non-remittance of pension contributions of their employees, state governments and companies are still shunning pension remittance, LEADERSHIP has learnt.

Since the commencement of the debt recovery initiative in June 2012, up to 31 March 2025, the National Pension Commission (PenCom) has disclosed that a total of N29.65 billion has been recovered, consisting of N14.86 billion in principal contributions and N14.79 billion in penalties.

Part 2, Section 4 of the Pension Reforms Act (PRA) 2014 states that the Contribution for any employee to whom this Act applies shall be made in the following rates relating to his monthly emoluments-(a) a minimum of 10 per cent by the employer, and (b) a minimum of eight per cent by the employee.

While an eight per cent contribution due from an employee would be deducted from his salary by his employer and remitted alongside the company’s 10 per cent, making a cumulative 18 per cent to the RSA of the worker, most employers are now circumventing this provision

In Q1, 2025, a total of N1.35 billion was recovered from 19 defaulting employers, comprising N972.12 million in outstanding contributions and N381.88 million in penalties, and 12 persistently non-compliant employers were referred to the commission’s Legal Department for prosecution.

Although PenCom has made it a matter of duty to present pension compliance certificates annually to compliant organisations, so that they can bid for government contracts, this has not deterred companies from failing to remit as and when due.

As a result, PenCom, in conjunction with the National Insurance Commission (NAICOM) is now taking a tougher stance to increase compliance on remittance.

PenCom and NAICOM have jointly issued a directive compelling insurance companies and their vendors to fully comply with Nigeria’s pension and insurance laws, especially in the area of pension contributions as and when due.

The new directive, contained in a Joint Circular signed by the director of the Surveillance Department at PenCom, Abdulrahaman Muhammad Saleem and the director of Legal, Enforcement and Market Development at NAICOM,  Dr Talmiz Usman, was meant to strengthen compliance with the Pension Reform Act (PRA) 2014 and the Nigerian Insurance Industry Reform Act (NIIRA) 2025.

The circular focused on compliance with the CPS and the requirement for all employers to maintain Group Life Assurance (GLA) coverage for their employees.

Under Section 2 of the PRA 2014, every employer in the public and private sectors is required to participate in the CPS, remit pension deductions within seven working days after salary payment, and provide life insurance coverage for employees.

However, despite continuous engagements, audits, and sanctions by PenCom, a significant number of employers, including some within the financial services industry, have remained in breach of these legal obligations.

PenCom has appointed Recovery Agents to audit defaulting employers, impose administrative sanctions, and pursue judicial recovery of outstanding pension contributions and penalties.

Yet, the persistence of non-compliance has continued to threaten the sustainability and credibility of the CPS, prompting this joint enforcement strategy with NAICOM.

By this new circular, going forward, all Licensed Insurance Companies (LICs) are expected to possess valid Pension Clearance Certificates (PCCs) from PenCom and Group Life Assurance Certificates compliant with NIIRA 2025 before engaging in any operational or investment activity.

Every vendor, service provider, and counterparty that seeks to do business with insurance companies must also hold valid PCCs and GLA Certificates as a precondition for any contractual agreement, the regulators disclosed.

The directors of both regulators also extend this directive to investment transactions, including commercial papers, bond issuances, and bank placements.

“All counterparties involved must execute a Compliance Attestation, affirming that their own vendors and service providers also maintain valid PCCs and GLA Certificates.

“This cascading requirement effectively embeds pension and insurance compliance throughout the investment value chain, ensuring that no entity within the insurance ecosystem operates outside the law, ” they pointed out.

Insurance firms are also required to integrate these compliance requirements into their internal policies, vendor selection processes, due diligence procedures, and investment risk assessment frameworks.

Similarly, parent companies, subsidiaries, holding firms, and institutional shareholders of insurance entities must demonstrate full compliance before any business dealings are approved.

Recognising the operational adjustments that the new measures demand, PenCom and NAICOM have granted a six-month transition window from the date of the circular to enable full implementation.