Employee Right To Pension:A Statutory And Policy Analysis

INTRODUCTION

In today's increasingly competitive business environment, many organisations are under pressure to reduce operational costs and improve financial efficiency. One area that has come under scrutiny is employee benefits, particularly pension obligations, which often represent a significant long-term financial commitment for employers. As a result, some companies adopt cost-cutting measures by restructuring pension contributions, or, in some cases, offering alternative benefits, such as accommodation, feeding etc, in place of traditional pension schemes. While these strategies may provide short-term financial relief for employers, they raise important legal and policy questions about the protection of employees' retirement rights and whether pension entitlements can lawfully be reduced, substituted, or waived. This article examines the implications of such practices and explores the legal position on the enforceability and protection of pension rights under the Pension Reform Act 2014.

STATUTORY FRAMEWORK OF PENSION OBLIGATIONS UNDER THE PENSION REFORMS ACT

The PRA 2014 provides that the Act shall apply to employees in both public and private establishments. The minimum threshold for private sector employers to participate in the Scheme is fifteen (15) employees, however, the Act further provides that private sector with less than three (3) employees and self-employed persons shall be entitled to participate in the scheme, notwithstanding the minimum threshold. The participation of employees of employers that do not meet the minimum threshold of 15 employees will be subject to the guidelines to be issued by the Pension Commission (the Commission).¹

The Court of Appeal in Emokpae v. Stanbic-IBTC P.M. Ltd. (2015) 17 NWLR (Pt. 1487) 57 stated that the objective of the pension scheme fund is to assist improvident individuals by ensuring that they save in order to cater for their livelihood during old age

Section 4(1) of the PRA mandates that the employer shall contribute a minimum percentage of the employee's monthly emoluments to a Retirement Savings Account (RSA), with a corresponding contribution by the employee. The language of compulsion is reinforced by the repeated use of "shall", which under Nigerian jurisprudence imports a mandatory, not discretionary, duty.

Section 11(3) the PRA imposes on employers a duty to deduct and remit pension contributions within seven (7) working days of salary payment. The PRA 2014 further provides that if an employee fails to open a Retirement Saving Account (RSA) after a period of six (6) months after assumption of duty, his employer shall subject to guidelines issued by the Commission, request a Pension Fund Administrator to open a nominal retirement saving account for such employee for the remittance of his pension contributions.²

In the case of Ugochukwu Akubue V. MTN Nigeria Communication Ltd³the Claimant sought a declaration that that the remittance of the Claimant's pension funds by the 1st Defendant to the 2nd Defendant (Stanbic IBTC Pension Managers Limited) without the Claimant's consent is unlawful, oppressive, ill motivated, mischievous and an unfair labour practice, a declaration that the remittance of the Claimant's pension funds by the 1st Defendant to the 2nd Defendant, without the Claimant's consent is a gross violation of the Claimant's rights under the Pension Reform Act, amongst others. The Claimant argued that this power is not absolute but is "subject to the Guidelines issued by the National Pension Commission." However, the Claimant failed to present the Guidelines or refer to any section or aspect of the said Guidelines that the 1st Defendant failed to comply with. The Court held that from the evidence before it, it is clear that when the Claimant failed to supply his PFA, the 1st Defendant merely complied with the provisions of the Pension Reform Act, therefore the 1st and 2nd relief fails.

The Act further prescribes penalties for non-remittance of pension contributions, fines and possible imprisonment.⁴ The statutory design clearly situates the obligation squarely on the employer, independent of any private agreement with the employee.

EMPLOYEE BENCHMARK FOR CONTRIBUTORY PENSION SCHEME

There are different interpretation/school of thought to Section 2 of the PRA 2014, while a school of thought believe that the scheme applies to employees who are in the employment of private organization with less than three employees to ensure that those working in small organizations are mandatorily covered under the scheme, others are of the opinion that the Act compulsorily applies only to employees in an organization with fifteen or more employees.

The provisions of the PRA 2014 provides that the Act shall apply in the case of the private sector, to employees was are in the employment of an organization in which there are 15 or more employees.⁵ It went further to provide thus:

This raises issues as to whether the participation of private sector employees in an organization with less than fifteen employees will be on voluntary basis without imposing compliance obligations on their employers.

The Supreme Court in Emordi v. Igbeke (2011) 9 NWLR (Pt. 1251) 24 on denotation of "Shall" held that

The Act provides that employees of organization with less than three employees as well as self-employed persons "shall be entitled" to participate under the scheme.

The Blacks Law Dictionary 11th Edition (the Dictionary) defined "entitle to mean" "to grant a legal right to or qualify for" the Blacks Law Dictionary further defined entitlement to mean "an absolute right to a (usu. monetary) benefit, such as social security, granted immediately upon meeting a legal requirement."

The Dictionary further defined "right" to mean:

Right is a correlative to duty; where there is no duty there can be no right. A is said to have a right that B shall do an act when, if B does not do the act. A can initiate legal proceedings that will result in coercing B. In such a situation B is said to have a duty to do the act.

In addition, the Dictionary further defines "absolute right" as

The Act further provides that such participation shall be in accordance with the guidelines issued by the Commission. The Commission in 2018 released its Guidelines for Micro Pension Plan (the Guidelines).

Paragraph 6.1.1 of the Guidelines provides that

A combined reading of the Act, the provision of the Dictionary and the Guidelines can be said to mean that employees in an organisation with three or less employees shall participate in the contributory pension scheme is subject to the employees eligibility under the Guidelines.

CAN PENSION RIGHTS BE WAIVED?

Generally, Nigerian law recognises that parties cannot contract out of statutory obligations, particularly where the statute is enacted for the protection of a class of persons or for broader public welfare. The contributory pension scheme is designed to ensure post-retirement security and reduce old-age poverty. Pension rights therefore form part of Nigeria's public policy architecture.

In the Case of Tayo Ajibulu v Staco Insurance PLC⁶ the claimant was seeking various entitlements arising from his employment, which included gratuity, outstanding salaries, reserved salaries, and notice period salary. In relation to the Pension, the defendant admitted non-remittance of the pension but cited financial constraint and internal policies. The National Industrial Court held that as follows:

In the 2025 Judgment of the National Industrial Court in Gabriel Odii v. Digital Jewels Ltd NICN/LA/18/2021 the issue of whether the defendant breached the provisions of the Pension Reform Act 2014 for non-remittance of the Claimant's pension. The submission of the claimant's counsel is that the remittance contribution into the retirement savings account of an employee is a mandatory obligation which cannot be waived by the defendant as the defendant has the responsibility to deduct pension contributions into the RSA and not the duty of the claimant to refuse the deduction. To the defendant, the claimant waived his right to the statutory requirement in the Pension Reform Act as the right to pension can be waived. This is what the defendant is relying on, and in paragraph 12 of the amended statement of defense, the defendant averred that when the company decided to enrol the claimant with a Pension Fund Administrator for the purpose of remitting RSA on his behalf, the claimant declined, refused and opted out of this request. The Court held that this averment of the defendant cannot be correct as it is contrary to the provision of Pension Reform Act 2014. There was also no evidence that the defendant contributed its own share which is violation of the law. The NICN therefore order the defendant to remit the pension contribution of the claimant.

Generally, the court would refuse to enforce agreements that are contrary to public policy, particularly where they undermine statutory labour protections.

The Court of Appeal in Momodu v. N.U.L.G.E. (1994) 8 NWLR (Pt. 362) 336 on meaning of pension held that

The Court further stated that Pension is a right which cannot be unilaterally taken away by the employer. In the instant case, the 1st respondent had no right to stop the payment of the pension of the appellant which the 1st respondent had paid to the appellant for a period of about 18 months before stoppage for the reason that the appellant had not surrendered the typewriter in dispute in this appeal as well as the telephone line No. (052) 223449 installed in the appellant's office of the 1st respondent. (P. 350, paras. A-B).

The above court decisions and the provisions of the PRA 2014 raises question and concerns as to the compulsion of pension contribution and whether an employee can opt out of pension contribution.

Consequently, an employer remains fully liable for non-remittance regardless of any waiver instrument. Allowing employees or employers to waive pension rights would defeat the purpose of the PRA 2014 and undermine national social security objectives.

The Court in Ariori v. Elemo (1983) 1 SCNLR 1(1983) ANLR 1 decided that when a right is conferred either by the Constitution or a Statute solely for the benefit of an individual he should be able to forgo the right or, in other words, waive it either completely or partially depending on his free choice and the extent to which he has forgone his right would be a matter of fact and each will depend on its peculiar facts.

In the case of Nigerian National Petroleum Corporation v. Dr. I. Nwodo & Ors. LER (2018) the Court of Appeal relying on the case of Ariori v Elemo (Supra) stated that:

Bello JSC (as he then was) put it in Attorney-General of Bendel State v. Attorney-General of the Federal & 22 others (1981) 10 SC 1 at p. 54, stated that the law does not permit a person to contract himself out of or waive the effects of a rule of public policy.

The Supreme Court in C. & C.B. Dev. Co. Ltd. v. Min., E.H. & U.D. (2019) 5 NWLR (Pt. 1666) 484 further reiterated that when a right is conferred solely for the benefit of an individual who is sui juris and not under any legal disability, there is no limit on the extent to which he can waive such right because the right is for his benefit. The only exception is where the statute itself forbids waiver of its statutory provisions.

IS PENSION RIGHT AN INDIVIDUAL RIGHT OR OF A PUBLIC NATURE

The question therefore is whether the PRA confers purely private or individual rights which may be waived or whether the statutory provision confers rights of a public nature as a matter of public policy. If it is the later, the provision of such statute cannot be waived as no one is permitted to contract out of or waive a rule of public or constitutional policy.

The Blacks law dictionary, 11th Edition defines "Personal right" as "a right that forms party of a person's legal status or personal condition, as opposed to the person's estate – also termed individual right."

The Dictionary further defines "private right" as "a personal right, as opposed to a right of the public or the state. Cf public right." and "Public right" is defined as "a right belonging to all citizens and usually vested in and exercised by a public office or political entity"

It is the writer's opinion that the Pension right is a public right and as such cannot be waived. From the arguments above and the judicial authorities, where in an employment contract, an employee is entitled to receipt of certain benefits, such benefits being contractual and for the personal interest of the employee can be waived and the court will recognise such waiver. In addition, where a personal or private right is provided by a statute, such right can be waived by the individual, and the court will recognize the waiver. See the cases of Guinness (Nig.) Plc v. Onegbedan (2012) 2 NWLR (Pt. 1322) 31; Enyi V. Benue State Judicial Service Commission & Ors (2021) LPELR-54437(CA); Agbo v. State (2025) 10 NWLR (Pt. 1995) 1.

However, where such right is a public right regulated by a public office like the National Pension Commission (PenCom) such right can no longer be said to be an individual right but a public right which cannot be waived.

The inability to waive pension rights creates significant compliance obligations for employers:

1. No employment contract, HR manual or employee waiver can absolve the employer from remitting pension contributions.
2. Employers are exposed to administrative sanctions, penalty interest, and criminal prosecution for non-remittance.
3. Failure to comply may also expose the employer to civil liability if employees seek to enforce their statutory pension entitlements.
4. Employers must therefore treat pension remittances as a non-negotiable statutory duty.

CONCLUSION
Pension rights under the Pension Reform Act 2014 are statutory, mandatory and grounded in public policy. An employee cannot validly waive these rights, and any purported waiver is void and unenforceable. Employers remain liable for pension remittances irrespective of employee consent. Ultimately, the inability to waive the pension rights reinforces the protective and social security aims of the pension regime in Nigeria.

Footnotes

1 Section 2 of the Pension Reforms Act 2014

2 Section 11 (5) of the Pension Reforms Act 2014

3 SUIT NO: NICN/LA/433/2021

4 Section 99 and 103 of the Pension Reform Act 2014

5 Section 2(2) of the Pension Reform Act 2014

6 NICN/LA/327/2023

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.