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Glossary

Glossary of Pension Terms

A simple guide to help you understand key pension-related terms and concepts:

A

  • Annuity
    A fixed sum of money paid regularly to a retiree, usually for the rest of their life, purchased from a life insurance company using retirement benefits.
  • Asset Allocation

    The process of dividing pension contributions among various investment options (e.g., bonds, equities) to balance risk and return.

B

  • Benefit Administrator

    The entity responsible for managing and processing retirement benefits under the pension scheme.
  • Benefit Administration
     The process through which pension benefits are accessed—whether at retirement, loss of job, death, or special withdrawal events.
  • Benefit Forms & Documents
    
 Standardized paperwork required to process pension-related transactions like withdrawals or fund transfers.

C

  • Cross Border Arrangement
    A regulatory framework that allows Nigerians working abroad or expatriates working in Nigeria to participate in the Contributory Pension Scheme.
  • Custodian

    A licensed financial institution responsible for holding pension assets on behalf of the PFA and ensuring safekeeping and compliance.

D

  • Defined Benefit Scheme (DB)

    A pension plan where retirement benefits are predetermined based on factors like salary and years of service, often managed by employers or specialized administrators.
  • Death Benefit

    The pension entitlement paid to the named beneficiaries of a deceased RSA holder or retiree.

E

  • En Bloc Withdrawal

    A lump sum payment made to retirees whose RSA balances are below the regulatory threshold (currently ₦550,000), paid in full.
  • Ethical/Non-Interest Fund (Fund VI)

    A pension investment fund that complies with Shari’ah principles, investing in non-interest-bearing instruments.

F

  • Fund Performance
    A record of how well a pension investment fund has done over time, usually expressed in terms of returns or price movement.
    Fund I–VI
    Pension fund categories under the Multi-Fund Structure, each offering different risk and return profiles based on contributor demographics and preferences.
  • Fund I: Aggressive growth (under 50, opt-in only)
  • Fund II: Balanced growth (default for under 50)
  • Fund III: Conservative growth (default for 50+)
  • Fund IV: Retiree fund (for retirees on Programmed Withdrawal)
  • Fund V: Micro Pension Fund (for informal sector)
  • Fund VI: Non-Interest Fund (ethical, Shari’ah-compliant)
  • Fund Switch
    The process of changing your RSA from one fund type to another (e.g., Fund II to Fund I), subject to regulatory conditions (usually once annually).

G

  • Gharar
    An Arabic term used in Islamic finance to describe excessive uncertainty or ambiguity in contracts, which is prohibited under Shari’ah principles.

M

  • Micro Pension Plan (MPP)

    A pension scheme tailored for self-employed individuals and workers in the informal sector, offering flexible contribution terms and partial access to savings.
  • Multi-Fund Structure

    A system introduced by PenCom that segments pension funds based on age and risk appetite to improve returns and align with contributors’ retirement goals.

P

  • Pension Fund Administrator
    (PFA)
    A licensed company like Parthian Pensions that manages the Retirement Savings Accounts of contributors under the Contributory Pension Scheme.
  • PFC (Pension Fund Custodian)
    A licensed institution that holds all pension assets on behalf of RSA holders. It ensures security, safekeeping, and compliance.
  • Programmed Withdrawal

    A method of withdrawing pension benefits in periodic sums (usually monthly), managed by the PFA.

R

  • Retiree Fund (Fund IV)

    A low-risk investment fund dedicated to RSA holders who have retired and are receiving pension benefits.
  • Retirement Savings Account (RSA)

    A personal account opened under the Contributory Pension Scheme for individuals to save towards retirement.


S

  • Self-Service Portal

    An online platform that allows RSA holders to view statements, manage contributions, and initiate transactions independently.
  • Sukuk
    Islamic financial certificates (similar to bonds) that generate returns from asset-backed

T

  • Temporary Access (25%)

    The right of an RSA holder below age 50 to withdraw up to 25% of their account balance after being out of employment for at least four months.
  • Transfer Window

    The period, as approved by PenCom, during which RSA holders can switch from one PFA to another.

V

  • Voluntary Contributions (VCs)
 Additional, non-mandatory payments made into an RSA by a contributor to enhance their retirement savings.

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All rights reserved

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