By LOVETH AZODO, Lagos
When a pension contributor dies, families often rush to the deceased’s Pension Fund Administrator (PFA), expecting that the person listed as the “Next of Kin” will automatically inherit the funds.
But that assumption, common among Nigerian workers and their relatives, is not supported by law.
Under Nigeria’s Contributory Pension Scheme (CPS), being named as a Next of Kin does not automatically make one a beneficiary.
The two roles, though often confused, are very different. The Next of Kin merely serves as a point of contact or representative for administrative communication, while beneficiaries are the individuals legally entitled to receive the contributor’s pension savings either by nomination, Will, or a court order.
In a statement by the Pension Fund Operators of Nigeria (PenOp), explained that this misconception remains one of the most frequent causes of delay in processing death claims.
“We’ve seen many families come forward believing the Next of Kin is the inheritor. But the law is clear only those properly nominated as beneficiaries or recognized by the probate court can access the funds,” the officer said.
Nigeria’s CPS was introduced in 2004 under the Pension Reform Act (PRA) and amended in 2014 to ensure uniform and transparent management of retirement savings. The scheme mandates both employers and employees to contribute to a Retirement Savings Account (RSA), which is managed by licensed PFAs under the oversight of the National Pension Commission (PenCom).
When a contributor dies before retirement, the balance in the RSA including all investment income becomes payable to their legal beneficiaries.
The process begins when the family or representative reports the death to the PFA and submits essential documents such as a death certificate, valid means of identification, and, where applicable, a Letter of Administration from a probate court. PFAs verify these documents before releasing funds to those legally entitled.
If disputes arise among potential claimants often due to multiple nominations or lack of a valid Will the matter is referred to the courts.
“In such cases, we are guided by probate orders,” the PFA officer added. “Without clear documentation, the process can stretch for months.”
For contributors who die after retirement, the treatment of pension benefits depends on the payment plan chosen. Those who opted for Programmed Withdrawal receive monthly payments directly from their RSA. If they die before the funds are exhausted, the remaining balance is transferred to their beneficiaries. Retirees who chose a Retirement Annuity with an insurance company may also have their loved ones benefit, provided the annuity includes a guaranteed payment period. If death occurs within that period, the remaining income is paid to beneficiaries or the estate.
The Pension Reform Act ensures that pension benefits remain tax-exempt, but PFAs may deduct any outstanding debts owed by the deceased to their employer before disbursement.
In cases with no clear nominations, PenCom regulations require PFAs to release funds only to individuals legally recognized by a Will or through Letters of Administration.
Officials say many delays stem from poor record-keeping or the failure of contributors to update their beneficiary information. “Some workers fill in these forms when opening their RSA and never revisit them,” said a PenCom official familiar with death benefit administration. “By the time they pass away, circumstances may have changed people remarry, have children, or lose touch with those they listed years ago.”
Experts advise contributors to review their RSA details periodically, inform family members about their pension arrangements, and keep documents like RSA statements, nomination forms, and identification papers safely stored.
Families are also encouraged to promptly contact the deceased’s PFA once death occurs and ensure all required papers are in order to avoid unnecessary delays.
The CPS was designed to protect the life savings of Nigerian workers and ensure that their dependents are not left stranded. Yet, as several PFAs confirm, many families continue to learn the hard way that being listed as Next of Kin is not enough.
In the end, what determines access to a deceased contributor’s pension is not sentiment but documentation because in Nigeria’s pension system, the law, not the label, decides who gets paid.
