The structural and economic challenges facing Nigeria’s Contributory Pension Scheme (CPS) has created a paradox for the Nigerian pensioner, from widening gap between the growth of pension assets and the actual standard of living for retirees to the human cost of the crisis. In this report, OLUDARE RICHARDS analyses pensioners’ grievances regarding low monthly payouts, the impact of high inflation on investment returns, and the regulatory environment governing Pension Fund Administrators (PFAs).

The Nigerian pension industry has undergone a significant transformation since the 2004 reforms, moving from a deficit-laden “pay-as-you-go” system to a funded Contributory Pension Scheme (CPS).

As of late 2024, the National Pension Commission (PenCom) reported that total Assets Under Management (AUM) reached N22.51 trillion, with a total registration of 10.58 million Retirement Savings Accounts (RSAs).
 
Despite this institutional growth, however, a significant number of retirees express dissatisfaction with the actual value of their benefits. The central tension lies in the fact that while the ‘pot’ of money is growing, the purchasing power of the individual retiree is being eroded by macroeconomic volatility.

The old Defined Benefit (DB) scheme was intended to eliminate the perennial delays and corruption that characterised the previous era, where pensioners often slumped in long queues waiting for non-existent funds.

While the CPS has successfully built a massive pool of investable capital, the transition has introduced new market-based risks that the average Nigerian retiree was perhaps ill-prepared to navigate.

The robust balance sheets of the PFAs notwithstanding, stories of retirees across the country reflect a common theme of deferred hope.

Many have lamented that the transition from a monthly salary to a pension stipend has not been a gradual step down, but a sharp fall into financial instability.
 
The case of a retired administrative officer from a Federal ministry in Abuja, Mr. Haruna Abubakadir, is emblematic of the struggle with Accrued Rights – the portion of the pension owed by the government for service years prior to 2004.

After retiring in early 2024, Haruna waited 18 months without a single kobo in payment. He explained to The Guardian that while his PFA was ready, the Federal Government had not released the bond for his Accrued Rights. He was forced to sell his only car to pay for his son’s final year tuition and his wife’s surgery.
 
“By the time the money finally entered my account in late 2025, the value of that car had doubled, and my savings were already depleted by debts. I received a sum that could not even buy back the life I had two years ago. It is not enough to conclude that the system is not perfect; we are talking about life after service here. What do I fall back on now?” he asked rhetorically.
 
Haruna’s experience underscores a systemic failure where the government’s liquidity issues directly translate into the destitution of its former workforce.
 
In Lagos, Mrs. Adewale (full name withheld), a former supervisor at a multinational manufacturing firm, faced a different but equally grueling reality.

Unlike Haruna, her contributions were strictly under the new CPS, meaning her funds were supposedly ready upon retirement. However, the issue for her was the monthly Programmed Withdrawal.
 
“When I retired in 2023, my monthly pension of N65,000 could almost buy two bags of rice, but today, that same amount can barely buy one bag and pay my electricity bill,” she said.
 
She questions why her payout stays the same while the price of items rise almost every week. Her plight highlights the negative real return phenomenon, where the technical growth of a pension fund is rendered meaningless by the skyrocketing cost of essential commodities.
 
A retired secondary school teacher from the Southeast, Mr. Chidi Ekeshili, spoke to the confusion surrounding the exit options. He recalled being bombarded with calls from his PFA and an insurance agent the moment he reached 60.
 
“The PFA representative urged me to stay with them so that my children could inherit the remaining money, while the insurance agent promised me a salary for life. Although, yes I eventually chose the PFA, but I realised that the lump sum I received was barely 25 per cent of what I saved. It’s like they cajoled me into an option that benefits the administrator more than the retiree during the signing process,” Ekeshili said.
 
Ekeshili’s account reflects the information asymmetry that plagues the industry, where retirees are often pressured by marketing interests rather than being empowered by financial education.
 
A primary concern involves the actual monthly payouts, often described by retirees as insufficient for basic sustenance. This is largely a function of the Programmed Withdrawal model, where the PFA calculates monthly payments based on a retiree’s expected lifespan and the projected returns on their account balance.
 
An insurance expert, Osmond Osamudiamen, told The Guardian that in a stable economy, this model ensures longevity of the fund, but in Nigeria’s current climate, the removal of petrol subsidy and the devaluation of the naira have caused the cost of living to outpace these actuarial calculations significantly.
 
“For instance, a retiree who receives a monthly pension of N50,000 today finds that its value is significantly lower than it was two years ago. Currently, the CPS lacks a mandatory, automatic indexation mechanism to adjust these payments in line with the national minimum wage or inflation, a gap that labour unions have repeatedly pointed out.
 
“This absence of a cost-of-living adjustment means that while workers in active service may see their salaries rise to meet inflation, the retiree remains tethered to a figure calculated at the point of their retirement, resulting in a declining standard of living every year they remain out of the workforce,” he explained.
 
He said the disparity between nominal investment returns and real-world inflation is a critical data point in discourse.
 
“During the 2024 fiscal year, many PFAs reported returns on Fund II, the most common fund for active workers and early retirees, at approximately 17.05 per cent. While this appears positive in isolation, it must be weighed against a national inflation rate that averaged 33.18 per cent in the same period. This results in a negative real return of approximately 16.13 per cent. For the pensioner, this means their savings are technically growing in figures but shrinking in value,” he further said.
 
Critics have argued that PFAs, which invest over 62 per cent of their portfolios in Federal Government of Nigeria Bonds and Treasury Bills, should pass on more of the high yields currently offered by these instruments to hedge against inflation.

The current investment guidelines are conservative by design to protect the principal sum, but this conservatism has become a double-edged sword in an environment where the risk-free rate of return is consistently lower than the rate of price increases.
 
Transparency in performance reporting has also come under scrutiny following regulatory adjustments.

The shift towards using a three-year rolling average for reporting returns, rather than providing daily unit price fluctuations, has been criticised for masking short-term underperformance.
 
While the regulator maintains that this stabilises the noise of market volatility and prevents panic-switching between administrators, retirees said it makes it difficult for them to track exactly how their funds are performing in the immediate term.
 
According to a risk management practitioner, Titilayo Erinle, this lack of granular data contributes to a sense of distrust, particularly when combined with the arbitrary nature of lump sum calculations.
 
Erinle noted: “While regulations allow for a withdrawal of up to 25 per cent or 50 per cent of the total RSA balance under certain conditions, many retirees allege that PFAs often default to the lower percentage to maintain higher Assets Under Management. The management fees earned by PFAs are calculated as a percentage of the total assets they control; therefore, there is a perceived institutional incentive to keep as much money as possible within the fund.
  
“Administrative delays, though improving, remain a significant bottleneck. The Accrued Rights component has historically been prone to delays. In November 2025, the Federal Government released N758 billion to clear backlogs, a move that addressed some of the 21-month delays previously reported.
 
“However, the period of waiting remains a time of severe financial distress. During these months, retirees have been reportedly often unable to access even their own personal contributions held in their RSA, leading to a total cessation of income immediately following their exit from active service.”
 
Some retirees said this verification and enrolment gap is often cited as the most traumatic part of the retirement process.
 
“Even with the introduction of the online pre-retirement verification system, the manual elements of the process and the dependence on the Federal Treasury’s liquidity often lead to situations where a retiree spends the first year of their post-work life in debt,” Erinle added.
 
Meanwhile, there is an ongoing debate regarding the choice between Programmed Withdrawal and Retiree Life Annuity (RLA). Data from late 2024 indicates an increasing shift towards RLA, with over 185,000 retirees choosing to transfer their funds to insurance companies for a guaranteed lifetime payout.
 
This shift has created competition between PFAs and insurance providers. There are documented allegations that some PFAs attempt to discourage retirees from choosing the annuity option to avoid losing management fees. This competition often leaves the retiree without objective financial advice, as they are caught between the marketing interests of two different financial sectors.
 
According to Erinle, the Programmed Withdrawal offers the possibility of leaving a balance to beneficiaries if the retiree dies early, whereas the Annuity guarantees a monthly payment for life.
 
“In a country where life expectancy is statistically rising among the middle class but economic stability is low, the choice is fraught with risk. Many retirees complain that the pros and cons are not explained clearly, leading them to make choices they later regret when the PFA fund begins to dwindle,” she said.
 
The Nigeria Union of Pensioners (NUP) has become increasingly vocal as these economic pressures mount. The union has called for a total overhaul of the template used for calculating benefits, arguing that the current system favours the administrators and the government more than the contributors.
 
There are also calls on the government to allow retirees access to a higher percentage of their savings – up to 75 per cent – to enable them to invest in real estate or small businesses.
 
However, the regulator cautioned that such high withdrawals would deplete the funds too quickly. This conflict of interest highlights a fundamental disagreement on the purpose of the pension: Is it a survivalist safety net or a wealth-building tool for the elderly? In response to these challenges, PenCom has initiated several reforms aimed at strengthening the industry.
 
The 2025 Recapitalisation Directive mandated PFAs to increase their minimum standing capital to N20 billion, up from the previous N5 billion. This was intended to ensure that only the most financially stable and technologically advanced institutions manage public funds.
 
The consolidation that followed saw several smaller PFAs merge, which the regulator claims has led to better efficiency and lower operational costs. Additionally, the introduction of the RSA Mortgage Policy has allowed younger contributors to use up to 25 per cent of their pension savings as equity for home loans.
 
“While these are positive steps for active workers, they do not address the immediate liquidity and inflation concerns of those who have already retired. The Pension Enhancement exercise is often criticised for being too infrequent and the increases too marginal to make a real difference in the face of triple-digit price increases for essential goods,” Erinle noted.
 
Looking at the broader economic landscape, the sheer size of the pension fund – nearly 10 per cent of Nigeria’s GDP – makes it an attractive target for government borrowing to fund infrastructure.
 
While investing in infrastructure like toll roads and power plants can provide stable, long-term returns, it also raises concerns about the safety and liquidity of the funds.
 
Erinle said: “If a significant portion of the N22 trillion is tied up in long-term projects that do not yield immediate cash flows, the system’s ability to pay out monthly stipends during an economic downturn could be tested.
 
“Retirees often express concern that their hard-earned sweat is being used to build the nation while they are left in poverty, a sentiment that fuels the ongoing friction between the public and the PFAs.
 
“The future of the CPS may depend on the ability of the regulator and the administrators to align their investment strategies with the reality of the Nigerian consumer.
 
“As total assets are projected to reach N29.3 trillion by the end of 2025, the focus must shift from mere asset accumulation to the protection of the retiree’s purchasing power.

This would require more aggressive investment in inflation-hedged assets, such as real estate and infrastructure bonds with guaranteed returns, and perhaps a legislative change to allow for periodic adjustments to pension payouts.
 
“Without a structural adjustment that accounts for inflation and ensures prompt disbursement of accrued rights, the pension scheme risks being viewed not as a safety net, but as a system where the administrators thrive while the contributors struggle to maintain a basic standard of living.”
 
The risk management expert said that ultimately, the success of the 2004 reform will not be measured by the total billions under management or the profitability of the PFAs; but by the security and dignity it provides to the millions of Nigerians who spent their lives building the country.
 
“The current grievances regarding low returns and administrative delays are more than just technical flaws; they are challenges to the social contract between the state, the financial sector, and the Nigerian worker.
 
“As the country navigates a difficult economic recovery, ensuring that the elderly are not left behind is a moral and economic imperative that requires urgent attention from all stakeholders in the pension value chain,” she said.