Workers are voluntarily increasing their contributions to the pension scheme as they focus on the future in the face of economic uncertainties.

Data from the National Pension Commission (PenCom) shows that Additional Voluntary Contributions (AVCs) under the Contributory Pension Scheme (CPS) have more than tripled in the last two years.

The total AVCs rose from N1.08 billion in second quarter 2022 to N3.46 billion in second quarter 2024, indicating a 220.4 percent increase over the two-year period.

This sharp increase in voluntary savings suggests a growing awareness of the need for long-term financial security, even when short-term budgets are tighter than ever, analysts said.

Oguche Agudah, chief executive officer, Pension Fund Operators Association of Nigeria (PenOp) said, “Increased awareness about AVC is empowering individuals to boost their retirement savings and secure their financial future.”

According to him, education by both PenOp and operators is playing a pivotal role in helping people to understand the value of AVC.

“Research shows that economic uncertainty prompts people to save more, and the current concerns about Nigeria’s economy are pushing many to plan for a rainy day.”

Agudah further said that AVCs provide a reliable tool for individuals to protect their future amidst economic anxiety.

He noted the impact of increased salary for employees since the current economic hardship in the country, saying, “As salaries increase, so does the willingness to invest in AVC, driving better financial security.”

In November 2017, the National Pension Commission (PenCom) issued a circular specifying new rules for additional voluntary contributions to Retirement Savings Accounts (RSAs).

The new rules require that 50 percent of voluntary contributions for employees covered by the PRA 2014 be treated as ‘contingent’ and can be withdrawn once every two years on an incremental basis, subject to the Five-Year Tax Rule, while the balance of 50 percent can only be withdrawn at the point of retirement alongside the rest of the RSA.

Analysts at PenOp said the AVCs in the pension industry have demonstrated notable growth over the past five years, reflecting increasing interest from contributors.

“In Q2 2024, voluntary contributions reached N3.46 billion, compared to N1.08 billion in Q2 2022, a growth of over 215 percent. This surge highlights the rising confidence in the pension system and the attractiveness of voluntary contributions as a tool for long-term financial planning,” they said.

“With this upward trend, the industry is poised to see continued growth in voluntary contributions, further strengthening the overall pension ecosystem in Nigeria, the analysts further said.

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