It is rewarding for an employee to work through the years and have something to fall back on, in terms of pension – retirement funds. The law acknowledges this fact. Thus, necessary provisions are made as contained in the Pension Reform Act 2014 (“The Act”). The Act governs and regulates the administration of the uniform contributory scheme for both the public and private sectors in Nigeria. One of the core objectives of the Act is to ensure that every worker receives retirement benefits as and when due and to assist improvident individuals by ensuring that they save in order to cater for their livelihood during old age.

The Act applies to the Federal Government of Nigeria, State and Local Governments or any organisation or business that employs a minimum of three persons. However, employees of organisations with less than three employees as well as self-employed persons are entitled to participate under the pension scheme in accordance with guidelines issued by the National Pension Commission (“The Commission”). See Sections 2 and 120 of the Act.

How the retirement funds are raised/Rate of contribution

The Act provides for how the retirement funds can be raised as contained in Section 4. Both the employer and the employee are to make percentage contributions as specified. The employer is required to make a contribution of a minimum of 10% percent of the employee’s salary (monthly emoluments); while the employee is to contribute a minimum of 8% of the salary. The employer is empowered to deduct the amount directly from the employee’s salary. Where the employer undertakes to bear the full burden, the employer is required to make a contribution of not less than 20% of the employee’s monthly emoluments. In addition, the employer is required to maintain a life insurance policy in favour of the employee for a minimum of three times the annual total emolument of the employee.

Where should the pension contributions be paid?

Section 11 of the Act mandates the employee to open a Retirement Savings Account (RSA) with any Pension Fund Administrator of his or her choice. It is into this account that the pension contributions would be paid. The employee is to furnish the employer with details of the account.

By Section 11(5) of the Act, where an employee fails to open such RSA within six months after assumption of duty, the employer shall request a Pension Fund Administrator to open a nominal retirement savings account for such employee for the remittance of the pension contributions. An employer who fails to deduct and remit pension contributions within the stipulated time (not later that seven working days from the date the salary is paid) shall, in addition to remitting the amount already due, be liable to pay penalty for default (which must not be less than 2% of the amount remaining unpaid) as prescribed by Section 11(6) and (7) of the Act.

The rationale behind this is that the law generally seeks to ensure that the funds are reserved for the intended purpose – retirement funds. By Section 11(8) of the Act, an employee is only permitted to access his or her retirement savings account through the chosen Pension Fund Administrator.

Thus, an employee is not expected to receive payment of his pension funds directly from the employer, except in special cases as seen below.

Special Case

Recently, the National Industrial Court was called upon to determine some recondite issues as seen in the case of Jorge Allende Iriate Traquini v. ASC Nigeria Ltd (Suit No. NICN/LA/580/2017). Judgment was delivered on 10 March 2021 by Hon. Justice N.C.S. Ogbuanya.

Traquini v. ASC Nigeria Ltd

The Claimant (Jorge Allende Iriate Traquini), a foreigner, was employed as a General Manager for the Defendant (ASC Nigeria Ltd) in Nigeria through the Defendant’s parent company, Energy Resources International Ltd (member of the ONSTREAM Group) based in Anguilla, the British West Indices. The Claimant executed two employment contracts: one with Energy Resources Int’l Ltd (Executive Employment Agreement) and another with the Defendant (Contract Agreement). Both contracts took effect from 17 March 2014. The employment was later terminated effectively on 18 October 2017.

The Claimant and the Defendant agreed that the rate of contribution for the Claimant’s pension fund was 5% of the Claimant’s salary. During the period of the employment, both the Claimant and the Defendant failed to open a Retirement Savings Account as mandated by the Act. But the Defendant deducted and withheld 5% of the Claimant’s salary as pension fund for a period of three years.

The Claimant sued the Defendant claiming, among others, the agreed 5% pension fund contribution deducted from his salary by the Defendant but which was unremitted for the period of the employment. The Defendant filed its defence and counter-claim.

Considering the situation at hand, the trial Court called upon Counsel to both parties to address the Court on the Application of the compliance requirement with regard to opening of a Retirement Savings Account under the Pension Reform Act 2014, where parties are no longer in employment relationship, particularly as it affects a foreign employee who had relocated to outside the country, post-employment, as in the instant suit.


The Defendant’s argument was that the pension fund of the Claimant cannot be paid directly to the Claimant except through a Retirement Savings Account. The Defendant relied on the position stated in Agbonyi Agbo Geoffrey v. Dangote Agro Sacks Ltd (Suit No. NICN/LA/315/2013; Judgment delivered on 7 December 2017) where it was held that “The law does not envisage the payment of pension directly to an employee by an employer…”

The Defendant cited the English case of Halcyon Skies (High Court) (1977) 1 QB 14, 20-26 where it was held that at the termination of employment, such deducted but unremitted pension fund should be paid over to the employee directly as part of his wages. However, the Defendant contended that the case of Halcyon Skies involves an insolvent company while the Defendant in this case was solvent. The Defendant also urged the Court to be guided by overriding public policy and not place much reliance on the case. On his part, the Claimant argued that based on the authority of Halcyon Skies, the Claimant deserves to be paid directly.

Court’s decision

The learned trial Judge, Ogbuanya J., considered all the arguments and cases cited and made a declaration that the Claimant was entitled to the 5% of his salaries deducted as pension fund. Regarding the issue of whether the Claimant was entitled to be paid directly, the Court held that it was inclined to go with the position of the law as stated in Halcyon Skies above.

The Court also distinguished the case of Agbonyi Agbo Geoffrey v. Dangote Agro Sacks Ltd where it was held that such direct payment to an employee of the pension fund was not envisaged by law. According to the Court, the basis of the distinction was that:

Unlike the situation in Agbonyis Case dealing with issue of non-remittance of deducted pension into an employee’s RSA, the peculiar situation herein is beyond remittance of deducted pension contribution, given that there is no RSA opened by or for the employee, and the parties are no longer in employment relationship, and the gamut of the provisions of the Pension Reforms Act did not envisage opening a Retirement Savings Account (RSA) at post-employment stage.

But before concluding on the issue, the trial Court went further to make a critical and interesting finding. The Court observed that going by the terms of the employment contract, the Claimant and the Defendant agreed in Clause 12(d) that the rate of contribution for the purpose of the Claimant’s pension fund was 5% of the Claimant’s salary. This was contrary to the rate of contribution prescribed by the Act (both the 2004 and 2014 Pension Reform Act). The Court also found that no evidence was led to show that the Defendant was an employer mandated to operate the pension scheme under the Act. There was nothing to show that the Defendant has a minimum of three employees.

The implication of these findings, according to the Court, was that the Claimant was entitled to be paid directly the pension fund deducted but unremitted as terminal benefits. Ogbuanya J. reasoned (at p. 20 of the Judgment):

With this variance in contribution requirement and the Defendant not being shown to be an employer captured within the pension regime under the Pension Reforms Act, can it still be said that the parties intend to operate the said pension fund under the Act, and be regulated by the strict provisions of the statute, as canvassed by the learned Defendant’s Counsel? I think not. I hold the view that although a court of law is not authorized to make agreement for the parties while embarking on interpretative duty in construing an agreement, yet, where parties in their own agreement are not in tandem as to the exact intention of the parties therein, the court in invoking its interpretative jurisdiction, is empowered and is at liberty to distil the contract with the aim of finding out and bringing to the fore the true intention of the parties. See: Cannitec Int’l Co. Ltd. v. Solel Bonch (Nig.) Ltd. [2017] 10 NWLR (Pt. 1572) 66 at page 80, paras. A – B, the Supreme Court per Rhodes-Vivour, JSC. To my mind, an elucidated outcome of the judicial interpretation of the issue regarding payment of the Claimant’s pension fund under Clause 12(d) of the Contract of employment is that Pension Reform Act is not applicable to the circumstances of the parties’ employment contract, and that the Claimant is entitled to be paid directly his earned Pension Fund, as a terminal benefit.


The Court is commended for its conclusion. Section 4 (2) of the Act allows parties to, by agreement, revise the rate of contribution upwards. No provision was made for downward review as was done in this case. The implication is that the parties never intended to operate the pension scheme under the Act.

It is worthy of mention that since the Defendant never contended that it was not an employer as defined under the Act, perhaps it is safe for the Court to imply that the Defendant has a minimum of three employees for the purpose of the Act. Even if the Act was held to be applicable, it accords with reason and common sense that the Defendant was bound to remit the Claimant’s pension funds and not to warehouse the funds as found by the Court. The Claimant rightly argued that there was nothing in the contract which states that opening the retirement savings account was compulsory and that failure to do so would mean that the Claimant was not entitled to the funds. Interestingly, the Defendant has not expressly stated that it was not bound to remit the funds. Its argument was that it prefers to remit it into an RSA, an account which it never bothered to open following the Claimant’s failure to do so. The Defendant lacks the moral competence to insist on where it will remit the funds in the circumstances of the case. Going by the authority of Halcyon Skies, the Claimant is entitled to be paid directly being a post-employment remittance. More so, the Claimant, a foreigner, has returned abroad. The learned trial Judge was therefore right in its judgment.


Read full Judgment here.

Stephen Azubuike
Author: Stephen Azubuike
Stephen is a lawyer with expertise in Commercial Dispute Resolution and Technology Law practice. He is a Partner at Infusion Lawyers. He has successfully argued cases from the High Courts of various jurisdictions to the Appellate Courts on behalf of financial institutions, other corporate bodies and multinationals. He has advised a number of both established and startup tech companies. He tweets @siazubuike.
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