Pension for the self-employed and tiny employers
How Nigeria's Pension Reform Act 2014 lets the self-employed and staff of businesses with fewer than three employees join the contributory pension scheme.
By Achekam · · 4 min read · For Running a business businesses in Nigeria
A tailor with her own shop in Aba, a freelance software developer in Yaba, a plumber who works alone, a small salon with two stylists: none of them has an HR department or a pension scheme, and most assume the national contributory pension is for people with "proper jobs" at large employers. Retirement, for many of them, is something to think about later.
The Pension Reform Act, 2014 was written with them in mind too. It opens the contributory pension scheme to the self-employed and to the staff of very small organisations, through what PenCom calls the micro pension plan. This article explains where that right comes from, where to read the rules, and what it means for a business that runs payroll.
Section 2(3) of the Pension Reform Act 2014
The starting point is a single subsection. Section 2(3) of the Pension Reform Act, 2014 entitles employees of organisations with fewer than three employees, and self-employed persons, to participate in the Contributory Pension Scheme in accordance with guidelines issued by PenCom.
Two groups are covered:
- Self-employed people: traders, artisans, professionals working on their own account, anyone without an employer.
- Staff of organisations with fewer than three employees: the shop assistant, the driver, the receptionist of a very small business.
The word "entitles" matters. This provision gives these people the right to participate; it is framed as an opening of the scheme to them.
For a small employer, the practical point is about growth. A salon with two stylists today may have four next year. While it stays below three employees, its staff may join the scheme under the micro pension route. Once it grows, the question changes from whether staff may join to whether the employer must enrol them and contribute, and that is a decision to take with advice and write down, as the payroll section below explains. Keep a note of your headcount at each year end, so the change does not slip past unnoticed.
PenCom's Guidelines for Micro Pension Plan
How participation works is set out in PenCom's guidelines. PenCom publishes Guidelines for Micro Pension Plan 2018 as its guidelines for section 2(3). PenCom's page for those guidelines quotes the subsection and links to the guidelines themselves, which are a separate document. Read them on PenCom's Guidelines for Micro Pension Plan page, which explains how self-employed people and staff of organisations with fewer than three employees can join under section 2(3).
Because the details of contributions, withdrawals and how a member signs up live in the guidelines, take them from there, or from a licensed pension fund administrator, rather than from second-hand summaries.
One scheme for public and private sectors
The Pension Reform Act, 2014 provides for a uniform contributory pension scheme covering both the public and private sectors in Nigeria. The micro pension plan is not a separate, lesser scheme. It is a door into the same contributory scheme that covers civil servants and the employees of large companies.
Why anything citing the 2004 Act is out of date
The Pension Reform Act, 2014 repealed the Pension Reform Act No. 2, 2004. Old leaflets, templates and online articles still cite the 2004 Act. If a document you are relying on does, treat it as out of date and check the point against the 2014 Act and PenCom's current guidance.
The pension choice Achekam asks for before payroll runs
For a small business that does have employees on payroll, the question of whether pension applies comes up as soon as payroll is set up. Achekam does not guess.
To confirm Achekam's Nigerian 2026 payroll table, the firm or business must choose the pension coverage threshold, 15 or 3 employees, and give a reason. A payroll run then refuses to proceed until the employer has stated whether pension applies. Nigerian payroll in Achekam calculates PAYE on the Nigeria Tax Act 2025 bands, pension, opt-in National Housing Fund, NSITF, the ITF levy, rent relief and the minimum-wage exemption, all from a table a person confirms.
For a business with fewer than three employees, that decision is where the micro pension question belongs. Whether you treat pension as compulsory for your staff, or support them in joining under the micro pension route, write the reasoning down when you confirm the table. The decision itself is explored in deciding whether pension applies, and paying contributions to each employee's administrator in paying pension to each PFA.
Questions to ask a pension fund administrator
Whether you are joining yourself or helping a staff member join, these questions are worth asking any licensed pension fund administrator before signing up:
- Do you accept members under the micro pension plan, and what documents do you need?
- How are contributions paid: by transfer, by mobile channel, at a branch?
- Can contributions vary from month to month, and is there a minimum?
- What can be withdrawn before retirement, and on what conditions?
- How does the member see their balance and contribution history?
- If the member later takes a salaried job, how does the account carry over?
- What fees apply, and where are they published?
Write the answers down, compare more than one administrator, and keep the account details somewhere a family member could find them. If you are an employer helping a staff member join, agree in writing whether you will contribute anything yourself, how you will pay it over, and how you will show the payments on their payslip, so neither side is surprised later.
For a self-employed person, the hardest step is usually the first contribution. Once the account exists, small regular payments are easier to keep up than a large one put off for years.
General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.
