The National Pension Commission (PenCom) and the Pension Fund Operators Association of Nigeria (PenOp) have rejected the push by the Nigeria Police Force (NPF) to exit the Contributory Pension Scheme (CPS), warning that such a move could destabilise the national economy and undermine pension reform.
In a joint response, both bodies stressed that the CPS is capable of addressing the concerns of police officers without reverting to the Defined Benefits Scheme (DBS), which they described as financially unsustainable.
They explained that the CPS operates on a pre-funded model, where both employees and employers contribute a minimum of 18 per cent of the employee’s salary (8% from the employee, 10% from the employer) into Retirement Savings Accounts (RSAs). As of May 2025, the scheme had amassed over N24 trillion in assets invested in bonds, infrastructure, and capital markets—contributing to national development while ensuring long-term pension stability.
According to PenCom and PenOp, reverting to the DBS, which relies on direct government funding, poses serious fiscal risks. They cited Nigeria’s current budget deficit as a barrier, warning of potential delays in pension payments reminiscent of the pre-2004 era.
They further noted that an exit by the police would compel the government to fund pensions for approximately 400,000 personnel at an estimated annual cost of N3.5 trillion. With the 2025 budget already strained by a N13 trillion deficit, such a move would divert critical funds away from essential services including infrastructure, wage reviews, and public sector operations.
Outstanding liabilities under the DBS—such as the N253 billion in accrued rights still owed from the pre-2004 system—were also highlighted as evidence of the scheme’s long-term unsustainability without a contributory model.
PenCom and PenOp expressed concern over the potential market impact of pulling police contributions out of the CPS. They warned that such a withdrawal would require the liquidation of invested funds, eroding asset values and triggering financial instability.
They cautioned that allowing the police to exit could also encourage other public sector agencies to follow suit, thereby fragmenting the pension system and reversing the gains of the Pension Reform Act 2004.
Rather than exiting the CPS, the two bodies proposed reforms within the existing framework to address police welfare concerns. Recommendations included increasing employer contributions, reviewing benefit calculations, and ensuring stronger implementation to boost retirement payouts.
They also suggested that the government could introduce supplementary benefits for police retirees within the CPS, which would preserve transparency, reduce fiscal risk, and maintain regulatory oversight under PenCom.
PenCom and PenOp concluded by reaffirming their support for strengthening the CPS to better serve police officers, warning that a return to the DBS would increase government debt, destabilise the economy, and recreate past inefficiencies. They called for practical reforms to ensure fair, sustainable, and timely pensions without jeopardising the system.
