How To Calculate Pension From Salary in Nigeria

Calculating your pension contribution in Nigeria would help you keep track of how much you saved after your retirement from active service. While there are many pension companies that can help you do this, its imperative that you know how to calculate pension from your salary yourself, so that you won’t feel cheated.

Pension companies in Nigeria

The pension contribution scheme was put in place to ensure a better future for working class Nigerians to receive their pension after retirement from civil service or even work. Currently, it is being regulated by the Nigerian Pension Commission (NPC) and mandatory that your employer would have no say or authority to determine how you spend, invest or use your pension funds. To this effect, working class citizens are to remit 8% of their monthly salary to a registered pension company scheme.

Working for years in an organisation may leave one with nostalgic feelings when its times to retire due to old age and one may begin to ask oneself questions like, how do I survive? Old age can bring low energy input or even sickness, therefore, retirement is duly mandatory. The age range for retirement in Nigeria is usually from 60’s and 70’s, depending on the organisation or individual’s decision. However, pension can be put in place by an organization to support a retired worker.

A pension plan is a retirement account where employers and employees make monthly contributions. The employee receives the money when he/she retires. According to Nigeria pension commission, an employee is expected to contribute 8% of the sum of his basic salary, housing allowance, and transport allowance. The employer is however required to contribute minimum of 10% of the same sum. Also, the amount contributed by the employee is tax exempted. This is called Contributory Pension Scheme (CPS).

However, the employee may decide to contribute more than 8% and the employee may decide to contribute more than 10% or contribute the total 18% and save the employee the stress of contributing. Whichever, all is allowed. But the minimum is 8% on the employee and 10% on the employer and these is contributed monthly.

The main objective of the Contributory pension scheme (CPS) is to ensure that every person that worked in either the Public or Private Sectors in Nigeria, including the self-employed persons receives his/her retirement benefits as at when due. CPS is fully funded through the monthly pension contributions that are remitted into an employee’s Retirement Savings Account (RSA), managed by the Pension Fund Administrator (PFA).


It is important to note that this money cannot be accessible or withdrawn from your Retirement Savings Account (RSA) until you are 50 years old or when retired. In case of unexpected death, the family or stated beneficiary of the dead employee can have access to his/her pension funds.


In case you are wondering how to calculate your pension from your salary, this article will give you an example to guide you successfully. Since the required percentage is calculated from the Basic salary + Housing allowance + Transportation allowance, we will give improvised figures for our calculations;

  • Basic Salary = N250,000
  • Housing Allowance = N50,000
  • Transportation Allowance = N20,000

Since, we have given an improvised figure of what the employee earns monthly on BHT, we now move to calculate what his/her 8% contribution is going to be;

  • Employee’s contribution: 8% of N250,000 + 8% of N50,000 + 8% of N20,000 = N25,600

Now, we move on to calculate the employee’s contribution using his 10% quota;

  • Employer’s contribution: 10% of N250,000 + 10% OF N50,000 + 10% OF N20,000 = N32,000

The easiest formula for calculating pension from salary in Nigeria is

  • Total sum of the pension contribution (18%) = Total employee’s pension contribution (8%) + Total employer’s pension contribution (10%).

Finally, an addition of the employee’s contribution and the employer’s contribution will give the total amount paid monthly as Retirement Savings Account for pension plan. In this example, the total is N57,600.

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Oluchi Chukwu

Oluchi is a seasoned Information blogger, content developer and the editor of Nigerian Queries. She is a tech enthusiast who loves reading, writing and research

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