PenCom pushes early pension savings among Gen Z, informal workers

The National Pension Commission (PenCom) has urged young Nigerians to begin saving for retirement early, warning that delaying contributions could significantly reduce the wealth they accumulate over their working lives.

Omolola Oloworaran, the commission’s director-general, gave the advice on Monday during the youth engagement and opening ceremony of the 2026 National Pension Week, scheduled to run from 26 to 30 October.

Ms Oloworaran said people should start pension planning during their productive years rather than when retirement approaches, stressing that early contributions let savings grow through compound returns.

“Your pension is not about the day you stop working; it is about the decision you make whilst you are still working,” she said.

She explained that PenCom began the week’s activities with young people to encourage them to take responsibility for their financial futures and strengthen participation in Nigeria’s pension system.

According to her, the commission is seeking to build a pension system that accommodates the changing nature of work, including entrepreneurship, freelancing, technology and other forms of self-employment.

“The old pension system was built for a different world: one employer, one salary, 35 years in office. So let me make you a promise: we will not ask you to fit into an old system. We will build a system that fits the work that you do,” she said.

Early savings, compound returns

Ms Oloworaran illustrated the benefits of starting early with two hypothetical workers, Tolu and Emeka, who each save N10,000 monthly but begin contributing at different ages.

She said Tolu starts at age 20 and saves until age 60, while Emeka begins at 40 and contributes the same amount until retirement.

According to her illustration, Tolu would contribute approximately N4.8 million over 40 years, while Emeka would contribute N2.4 million over 20 years.

Assuming an annual return of 15 per cent, compounded over the respective periods, she said Tolu’s savings could grow to about N113 million, compared with approximately N13 million for Emeka.

She said the illustration showed how starting early could produce substantially greater retirement savings, even when monthly contributions were identical.

“Tolu did not earn more. Tolu did not work harder. Tolu simply started earlier, and that is the power of compounding,” she said.

Ms Oloworaran acknowledged the financial pressures confronting young Nigerians, including rent, family responsibilities, education costs and the rising cost of living.

However, she urged young Nigerians, including those in the informal sector, to make saving part of their financial habits as their earnings increase.

“The greatest advantage you have is not how much you earn today. It is time,” she said.

PenCom targets informal workers

The director-general said Nigerians do not need formal employment to start preparing for retirement, pointing to the Personal Pension Plan as an option for people outside the conventional employer-employee arrangement.

She said entrepreneurs, artisans, farmers, freelancers, technology professionals and content creators could contribute towards retirement savings based on their circumstances.

“You no longer have to wait for a formal job before you start saving for retirement,” she said.

Ms Oloworaran also pledged to make pensions easier to understand and access, improve digital services, strengthen oversight of pension operators and incorporate feedback from young Nigerians into the system.

She said younger workers increasingly expected speed, transparency, and digital access, adding that pension providers needed to make it easier to open accounts and participate.

“If a young Nigerian can order food in two clicks, opening a pension account must not take one day to open,” she said.

She also encouraged young people to balance current spending with long-term financial security, warning against letting current consumption habits undermine their future wellbeing.

“Real financial success is not just what enters your account. It is what you keep, what you build and what you protect,” she said.

Financial literacy, savings culture

At the event, Arese Ugwu, the acting managing director of the National Association of Securities Dealers (NASD), lamented that Nigerian schools and universities did not adequately teach financial literacy and retirement planning, leaving many young people without the knowledge needed to manage their finances.

She urged young earners to build a savings culture early, regardless of income level or competing financial responsibilities.

“If you don’t learn how to set aside income for your savings or your future when you have 10 naira, you’re not going to be able to learn how to set aside income when you have 100 million,” she said.

Ms Ugwu recommended budgeting as a starting point, suggesting that individuals allocate 70 per cent of their income to living expenses, 20 per cent to long-term financial goals and 10 per cent to emergency savings.

She said distinguishing between money saved for immediate spending and money reserved for long-term financial security was essential to building wealth.

Moreover, Timi Agbaje, managing partner at Versed Attorneys, said pension communication needed to reflect the immediate concerns and aspirations of younger Nigerians rather than focus exclusively on retirement at age 60.

He said messages about pensions often failed to resonate with young people facing high rents, financial pressures and uncertainty about their careers.

According to Mr Agbaje, pension campaigns could attract greater interest by presenting savings as a means of achieving independence, freedom and financial choices.

“When we start selling independence, freedom, and choices, young people can connect with that,” he said.

He also urged pension stakeholders to use social media and familiar digital trends to encourage young people to discuss their savings habits and make retirement planning more relevant to their everyday lives.

Pension contributions management

Omonzele Okpere, a fund manager at Stanbic IBTC Pension Managers, also highlighted the importance of compound returns and starting early.

She explained that contributions accumulated over time could provide financial support when individuals could no longer earn income through their usual work.

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Ms Okpere also outlined how Nigeria’s contributory pension system operates, explaining the respective roles of PenCom, pension fund administrators (PFAs) and pension fund custodians (PFCs).

She said the commission regulates the system, PFAs administer retirement savings accounts, and PFCs receive and hold pension contributions.

According to her, contributions are invested across different asset classes, including money-market instruments, treasury bills, bonds, government securities and alternative investments, in line with regulatory guidelines.

“So the funds are invested in assets like money markets, fixed income instruments like your treasury bills, your bonds, your government securities, alternative assets. The goal is to diversify the portfolio such that risk in the long term is diversified,” Ms Okpere added.

Under the contributory pension arrangement she described, employers contribute at least 10 per cent of an employee’s monthly emoluments, while employees contribute 8 per cent, bringing the combined contribution to 18 per cent.

Ms Okpere said the separation of regulatory, administrative and custodial responsibilities helps safeguard pension contributions.