How Do You Borrow From Your Pension Fund In Nigeria?

A type of fund that assembles money that is to be shelled out as pension for employees the moment they retire, is known as a Pension Fund. Pension funds denote large sums of money that are to be invested into the capital market. These investments typically take the form of stock and bonds in the capital markets, in order to generate profit.

A pension fund is the direct representation of a rudimentary capitalist, otherwise known as an institutional investor. These set of persons invest large amounts of money into public and private establishments. Pension funds are customarily managed by companies through their employers. The goal of a pension fund is to make sure there is enough money to offset the pension of employees after their retirement in time to come.

How Do You Borrow From Your Pension Fund In Nigeria?

Taking from your pension fund is contingent on your pension fund administrator. For every pension administrator, there’s a different requirement for the release of funds. Nevertheless, the process demands that you approach your Pension Fund Admin with the following documents;

  • A letter of annulment of appointment that was issued by your previous employer, or a letter of resignation.
  • The Pension Fund Administrator payslip of the last three months.
  • A letter requesting a payment percentage from your RSA balance made by you the recipient.
  • If available, you will need to provide proof of amassed pension rights. This is mostly required for workers in the public sector.
  • A letter of introduction from your bank, which can also be accessed in your bank statement.
  • Confirmation of your age through a sworn declaration of age, or preferably, your birth certificate.
  • A confirmation by your employer of full payment of all donations that you made to your Retirement Savings Account. This is exclusively for private sector workers.
  • If you work in the public sector, you will need a PenCom retiree indictment form.
  • Four passport photographs along with a form that your Pension Fund Administrator will give you.

Prerequisites To Borrow From Your Pension Fund In Nigeria

To use from your pension fund before retirement in Nigeria, certain requirements are needed. Typically, there are three major criteria, and at least one out of these three conditions must be satisfied to become eligible.

  • You must have made supplementary or voluntary lump sum benefactions into your Retirement Savings Account — RSA. That’s the money you can withdraw from before retirement.
  • Withdrawing up to 25% of your retirement savings account fund is possible, if you’re under age 50. This criteria holds onto the event that you lose your job and can’t procure an alternative within four months.
  • If you plan to obtain a mortgage loan, the Retirement Savings Account (RSA) allows up to a 25 percent withdrawal of retirement funds.

It is important that you note that besides these criteria out listed here, the pension reform act of 2014 rigidly proscribes withdrawing from your pension account.

A Statutory Requirement For All Nigerian Employees

Opening a pension account had become a legislative requirement for virtually all Nigerian employees. A token contribution to the Retirement Savings Account is made every month by all employees of the specific organization through the Pension Fund Administrator — RFA. One unacknowledged profit of owing a Retirement Savings Account is the fact that you can borrow from your pension fund when you’re in need of assistance.

With this a lot of individuals find that, owing a pension fund can be a source of assistance during emergencies. Even though there are unsung cons attached to borrowing the fund, it still stands tall as a better option than borrowing funds from financial institutions.

Reasons For Borrowing From Your Pension Fund

Among the many reasons that could make a person resort to borrowing from his or her pension fund, the most pressing ones remain the desire to expand a business or purchase premises. In the event that pension funds are not available, a lot of persons look into expanding their business overdraft, considering bank loans, or even dipping into their own savings.

As a result, it is little wonder that a lot of persons take on thorough company financial planning, but when they are greeted with sudden growth like the need to move premises, or an opportunity presented by a new project, they are compelled to borrow funds. Borrowing from your pension savings account is undoubtedly a safe bet, but a wealth of requirements are needed.


It can be tax efficient to borrow from your pension fund if you want to benefit your business, no doubt about that. However, it also implies that you are linking the fortunes attached to your business with your long-term retirement plans. To prevent future challenges, it is important that you speak to a financial planner before making decisions of this nature.

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