Retirement Savings Plan for Beginners in Nigeria
Planning for retirement in Nigeria might sound like something you can put off until later in life. After all, with bills to pay, children to raise, and businesses to run, it’s easy to think retirement planning can wait. But here’s the truth: the earlier you start, the better your financial future will be.

Retirement is not just about old age it’s about financial independence. It’s about reaching a point where your money works for you instead of you working for money. In Nigeria, where job security is often uncertain and inflation eats into income, having a retirement savings plan is more important than ever.

This guide will walk you through the basics of retirement planning, the available options in Nigeria, and practical steps you can take as a beginner to secure your future.

Why Retirement Savings Matter in Nigeria

Nigeria is a country with a large young population, but many elderly people still struggle financially. Traditionally, older Nigerians depend on their children, extended family, or community support. While family values remain strong, relying solely on others can create stress and financial hardship.

By starting your own retirement savings plan, you gain:

  • Financial independence – the freedom to make choices without being tied to others.
  • Peace of mind – knowing you’re prepared for the future.
  • Protection against uncertainty – whether it’s job loss, illness, or rising inflation.
  • A chance to enjoy retirement – travel, rest, or pursue hobbies without worrying about money.

In short, saving for retirement ensures that your older years are not just about survival, but about living comfortably.

Retirement Savings Options in Nigeria

The Nigerian financial system offers different ways to save for retirement. As a beginner, you don’t need to use all of them, but it’s important to understand your options.

1. Contributory Pension Scheme (CPS)

This is the mandatory pension scheme under the Pension Reform Act 2014. If you work in an organization with more than three employees, you and your employer must contribute a percentage of your monthly salary into a Retirement Savings Account (RSA) managed by a Pension Fund Administrator (PFA).

  • Employee contribution: Minimum 8% of your salary.
  • Employer contribution: Minimum 10% of your salary.

Over time, these contributions add up and are invested by your PFA, growing into a fund you can access after retirement.

2. Micro Pension Plan (for Informal Workers)

Nigeria’s economy is heavily informal, with millions of traders, artisans, and small business owners. To ensure they aren’t left out, PENCOM introduced the Micro Pension Plan.

Here’s how it works:

  • You register with a PFA.
  • You can contribute any amount, at any time daily, weekly, or monthly.
  • Your funds are split into two: one part for long-term retirement savings, another part accessible for emergencies.

This makes it flexible and perfect for freelancers, keke riders, tailors, and market women.

3. Voluntary Contributions

Even if you’re already under the mandatory pension scheme, you can make extra voluntary contributions. These funds grow your retirement balance faster and can also be withdrawn before retirement under certain conditions.

4. Personal Savings and Investments

Beyond pensions, you should build personal investments. Some good options in Nigeria include:

  • Fixed deposits – safe but low interest.
  • Treasury Bills and Government Bonds – stable and relatively risk-free.
  • Mutual Funds – especially money market or equity funds.
  • Real Estate – land, rental property, or short-let apartments (like Airbnb).
  • Cooperative Societies – common in Nigeria, useful for saving and borrowing at lower rates.

Diversifying ensures you’re not dependent on just one source of income in retirement.

How Much Should You Save for Retirement?

The big question most beginners ask is: “How much do I need to retire comfortably?”

While there’s no single answer, here are some guiding rules:

     1. 10–15% Rule – Aim to save at least 10–15% of your monthly income towards retirement.

  • If you earn ₦200,000 monthly, save at least ₦20,000–₦30,000.
      2. 70–80% Rule – In retirement, you’ll likely need 70–80% of your current income to maintain your lifestyle.
  • If you spend ₦150,000 monthly today, plan for about ₦105,000–₦120,000 in retirement.
      3. Start Small, Grow Later – Even if you can only save ₦5,000 or ₦10,000 monthly, consistency is key. Over 20–30 years, this adds up significantly, especially with interest and investments.

Steps to Create a Retirement Savings Plan in Nigeria

Here’s a beginner-friendly roadmap:

Step 1: Assess Your Current Finances

  • Write down your income, expenses, debts, and existing savings.
  • See how much you can realistically save monthly.

Step 2: Set Retirement Goals

  • At what age do you want to retire?
  • What lifestyle do you want—quiet village life, city living, or travel?
  • Do you want to leave wealth behind for children?

Step 3: Open a Retirement Savings Account (RSA)

  • Compare different PFAs and choose one with good returns and service.
  • Register and start contributions immediately.

Step 4: Add Micro Pension or Voluntary Contributions

  • If you’re self-employed, join the Micro Pension Plan.
  • If you’re employed, add voluntary contributions.

Step 5: Diversify with Investments

  • Don’t rely only on pensions. Add real estate, mutual funds, or treasury bills.
  • Invest in areas you understand to avoid scams.

Step 6: Automate and Stay Consistent

  • Set up automatic deductions from your salary or bank account.
  • Increase contributions as your income grows.

Step 7: Review Regularly

  • Check your RSA statements.
  • Rebalance your investments yearly.
  • Adjust your plan if your income or goals change.

Common Mistakes to Avoid

  1. Starting too late – Waiting until your 40s or 50s makes saving harder.
  2. Not diversifying – Putting all your money in one place increases risk.
  3. Ignoring inflation – Your savings should grow faster than inflation.
  4. Relying only on children – Family support is good, but not guaranteed.
  5. Withdrawing early – Avoid dipping into retirement savings except in emergencies.

Example: Retirement Plan for a Nigerian Earning ₦150,000 Monthly

Let’s assume Chika, a 30-year-old civil servant in Abuja, earns ₦150,000 monthly.

  • She contributes 8% (₦12,000) to her pension.
  • Her employer contributes 10% (₦15,000).
  • She adds an extra ₦5,000 voluntary contribution.
  • She also invests ₦10,000 monthly in a money market fund.

By the time she’s 60, her retirement fund (with investment returns) could be worth tens of millions of naira, ensuring a comfortable retirement.

Final Thoughts

Retirement planning may feel overwhelming at first, but it’s really about small, consistent steps. In Nigeria, the system is set up to help you whether through pensions, micro pensions, or personal investments.

Don’t wait until tomorrow. Start today, no matter how little you can contribute. The earlier you begin, the more your money grows, and the more secure your future becomes.

Remember: Your future self will thank you for the effort you put in today.