The adverse effects of the COVID-19 pandemic has taken a heavy hit on labour and employment relations. In some jurisdictions, policies and measures such as insurance, government grants, concessions and palliatives have been put in place to cushion the effect of the economic crunch and cater for the ever-increasing unemployment rate. However, in Nigeria, there is a dirge of economic palliatives or reliefs provided by the government to mitigate the economic consequence of the covid-19 pandemic. What then are the options open to Nigerian citizens who have become unemployed and lost their source of livelihood in the wake of the covid-19 pandemic? What measures can be put in place by the government to ensure that the economic hardship faced by employees in active service and the unemployed as a result of the covid-19 pandemic are alleviated?

This article is written with the objective of examining how the provisions of the Pension Reform Act can be used as a viable instrument in providing economic succour and relief to employers and employees who have been negatively impacted by the adverse economic consequence of the covid-19 pandemic.


The Pension scheme in Nigeria is a contributory pension arrangement which entails both the employer and employee making statutorily prescribed monthly contributions into the Retirement Savings Account (RSA) of the employee.

The purport of a pension fund as stated under section 1 (d) of the Act is to cater and serve as retirement benefits which can be utilized by employees when they are retired or in their old age. However, an incisive look at section 7(2) and 16(1) of the Act evinces the clear fact that individuals can access their pension funds when they voluntarily retire or disengage from work or are disengaged from work.

Section 7 and 16 of the Act lays down the conditions upon which an employee can make withdrawals from his pension account. They are as follows;

  1. An employee can withdraw a lump sum upon attainment of 50 years or upon retirement, whichever one is later or;1
  2. An employee may with the approval of the Commission be allowed to withdraw an amount not exceeding 25% of the total amount in the retirement savings account if after 4 months of retirement, disengagement, and cessation of employment the employee is unable to secure another employment provided that;2

(a) The employee voluntarily retires, disengages, or is disengaged on the advice from a medical practitioner that he or she is no longer physically or mentally fit, or due to a permanent disability or where an employee retires before attainment of 50 years in accordance with the terms and conditions of the employment or;3

(b) The employee disengages or is disengaged from his or employment before the attainment of 50 years and is unable to secure another employment within 4 months. 4

The implication of the above provisions is that any employee who is disengaged before the attainment of 50 years either voluntarily or by his employer and is unable to secure another employment within a period of 4 months would be able to make withdrawals not exceeding 25% of the funds in his retirement savings account upon obtaining the approval of the commission.

Having stated the above, the current realities of the covid-19 pandemic on employment is such that a number of people being rendered unemployed, companies shutting down operations, a large majority of companies not looking to hire new employees etc. Therefore, going by the provisions of the Act, an individual who becomes unemployed as a result of the covid-19 pandemic access up to 25% of his pension fund only after he can show that he has been unemployed continuously for 4 months.

Under normal circumstances, the 4-month period can be considered fair giving that affected individuals can rely on severance pay, engage in private businesses, rely on support from friends & families. However, having regards to the current global recession, inflation of basic necessities and commodities and the lockdown of businesses and economic crunch faced by a large number of the general populace, it is expedient for the government to provide some sort of economic relief or concession to mitigate the adverse economic impact of the covid-19 pandemic.

Also, many employers are not exempted from the economic impact of the covid-19 pandemic as they are generating little or no revenue as a result of the lockdown, travel restriction, crash in oil prices, global recession amongst others. Notwithstanding, an employer is still saddled with its obligations towards its employees and under the PRA required to contribute a minimum 10% monthly to the retirement savings account of its employees.

It is in the light of the above that we propose a holistic review of the requirements and obligations under the Pension Reform Act in order to mitigate the burden and hardship faced by both employers of labour and employees.

Proposed Options with Respect to Pension Scheme

  1. Suspension of the contributory pension scheme during the period of the pandemic: In view of the global economic downturn where employers are struggling to generate revenue and employees are on the receiving end of pay-cuts, the financial obligation on both the employer and the employee to make statutory contributions to the retirement savings account of the employee would be an additional financial burden. Employees can barely get by with their reduced salaries not to talk of deducting an extra minimum 8% in respect of the pension contribution. Also, asking the employer, who is currently struggling to pay salaries to make an additional 10% towards the pension contribution of its employees would be an overkill. In the circumstance, it would be a social welfare scheme, which is all inclusive, for the government to suspend the statutory contributions of both employers and employees during the covid-19 pandemic or for a stated period of time.
  1. An alternative to the above is reducing the pension contribution rate during the pandemic: Under the Act, both employer and employee are required to contribute a minimum of 10% and 8% respectively of the employee's monthly emoluments to the employee's Retirement Savings Account (RSA).

However, in view of the economic hardship faced by both employers and employees as a result of the Covid-19 pandemic, the contribution rate can be reduced by 50% i.e. 5% and 4% monthly contributions by both employers and employees respectively.

  1. Ease of Access to Retirement Savings Account after a month of such determination of employment and inability to secure another employment: Whilst we understand that the Act under Section 7 and 16, permits an employee who disengages or was disengaged from employment to access up to 25% of the total sum contained in his/her retirement savings account if they are unable to secure another employment within four (4) months, we opine that in view of the global recession and the economic crunch which has negatively impacted on employees who have lost their employments and are unable to cater for their families, it is adviced that such employees, who have pension accounts, are allowed to access a maximum 15% of their retirement savings after a month of being unable to secure another employment upon proof of such disengagement.

The concession can also be extended to employees who have been temporary laid off or placed on unpaid leave. Such employees can be allowed to access a maximum of 10% of their retirement savings.


It is noteworthy that, some other jurisdictions have reviewed their pension regulations and obligations in light of the covid-19 pandemic in order to mitigate the effect of the pandemic and provide economic relief and palliative to employees and employers of labour. For example;

  1. Finland has lowered the pension contribution rate for the remainder of 2020;
  2. Colombia has also reduced the pension contribution rate: The government vide decree 558 allowed the temporary reduction of the pension contribution to provide greater liquidity to employers, dependent and independent workers, and measures were also established to protect retired employees under the programmed withdrawal modality;5
  3. In Estonia, Pension contribution payments towards funded pensions have been suspended by the state from 1st July 2020 until 31st August 2021 and employees may also decide to suspend their contributions in the period from 1st December 2020 until 31st August 2021.
  4. Australia has passed the Coronavirus Economic Response Package Omnibus Act 2020. The new law, amongst other things, provide for temporary early release of pension benefits. Under this law eligible individuals affected by COVID-19 will be able to access up to $20,000 of their pension; up to $10,000 in the 2019-20 financial year and up to another $10,000 in the 2020-21 financial year.

The Nigerian government can take a cue from the above and ensure that whilst there is need to protect the extant pension framework and ensure that it is viable enough to cater for the livelihood of employees in their old age, there is an immediate and pressing need to cater for the survival and livelihood of employees and reduce the cost of labour on employers in the present covid-19 depressed economy.


In conclusion, we opine that the Nigerian Government in a bid to cushion the economic effect of the covid-19 pandemic on employers and employees, should temporarily waive or suspend some of the obligations and requirements contained in the Pension Reform Act.

In light of the foregoing, we recommend as follow;

  1. A bill be passed to allow quick access by a disengaged employee or an employee adversely affected by the pandemic, of a certain percent of the funds in his/her retirement savings account after a month of disengagement or being put on unpaid leave;
  2. Circulation of a detailed guideline for accessing pension funds. The procedure should be fast, with ease, without bottlenecks and accessible electronically.
  3. Temporary suspension of the pension contribution arrangement or reduction of the pension contribution rate for a given and clearly defined period of time.


1. Section 7 (1)

2. Section 7(2)

3. Section 16(2)

4. Section 16 (5)

5. accessed 18/5/2020

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.