If you sell provisions in a market stall, braid hair, drive a ride-hailing car or take freelance clients online, nobody deducts pension from your income. No employer matches anything. Retirement saving only happens if you set it up yourself, and that's why Radio Nigeria Lagos recently reported that PenCom is urging SMEs and informal sector operators to prioritise retirement savings.
The headline gives the message, not the rules. This guide covers how self-employed people can build a pension in practice, what to ask a pension company before you pay anything, and how to fit it into an income that rises and falls.
Why self-employed people need a separate plan
Salaried workers in the formal sector are generally enrolled in the Contributory Pension Scheme through their employer, which pays into a Retirement Savings Account (RSA). If you work for yourself, none of that happens automatically. You have no employer, so the first step is yours: open an RSA and decide how much to pay.
Many traders and freelancers think of their business as their pension. Stock, a shop or a client list can be valuable, but they depend on your health, your energy and the market. A pension balance sits in a regulated account and doesn't vanish when you fall sick for three months. It should be one leg of your plan, not the only one.
The two ways to get an account
There are broadly two routes. Check the current rules with PenCom or a licensed Pension Fund Administrator (PFA), because eligibility, minimums and withdrawal terms can change.
- A standard RSA with voluntary contributions. If you already have an RSA from a past job, you can usually keep using it and add voluntary payments. If you've never had one, you can ask a PFA to open one for you.
- A micro pension arrangement. Nigeria has a framework aimed at informal sector workers and the self-employed, with lower entry amounts and flexible payments. Ask any PFA whether they offer it and what the current terms are.
Whichever you choose, the account is in your name and linked to your own identity details. Never use someone else's NIN, BVN or details to register.
Step-by-step: getting started this month
- Find out whether you already have an RSA. If you ever worked for a company that paid pension, you likely have a PIN. Contact the PFA that held it rather than opening a second account. Our RSA basics and yearly checks guide explains how to confirm this.
- Shortlist two or three PFAs. Look only at licensed ones listed on PenCom's official website. Compare their fees, how easy it is to pay in small amounts, app or USSD access and how quickly they answer complaints.
- Ask these questions in writing. What are the charges? Is there a minimum contribution? Can I pay irregularly? What are the conditions for withdrawing voluntary contributions before retirement? Which fund type will I be placed in?
- Register with your own documents. Expect to provide ID, NIN and BVN details, a passport photo and proof of address. Do it through the PFA's official channels or an office, not through a stranger who offers to "help" for a fee.
- Make a first small payment and keep the receipt. Confirm it appears on your account or statement within the stated time.
- Set a calendar reminder for your payment day each month, or each week for daily earners.
How much should you put in?
A common rule of thumb is a percentage of income, not a fixed amount. Pick a percentage you won't resent in a bad month. Five percent paid consistently beats fifteen percent paid for two months before you stop.
A worked example (hypothetical)
Say Amaka sells fabric and her monthly profit varies between ₦120,000 and ₦300,000. Her average is about ₦180,000. She decides on 8% of profit, and rather than guessing each month she sets a floor.
- In a month with ₦120,000 profit: 8% is ₦9,600.
- In a month with ₦300,000 profit: 8% is ₦24,000.
- Average month: about ₦14,400, or roughly ₦172,800 a year.
Over 20 years at that average, she would contribute about ₦3.46 million before any investment growth, fees or inflation. Those figures matter: growth could add to it, but inflation will reduce what the money buys, which is why the amount should rise as your income does. Treat these numbers only as an illustration of how steady payments add up, not a forecast.
Fit it around irregular income
The big risk for traders and freelancers isn't choosing the wrong plan. It's skipping payments whenever cash is tight. Three habits help.
- Pay on the day money comes in. When a client pays or you close a good sales day, move your pension share immediately, before it joins spending money.
- Keep an emergency fund first or alongside. If you have no cash buffer, you'll want to pull money out in the first crisis. Build one using our emergency fund steps, even a modest one.
- Use a monthly system. Our irregular income budgeting guide shows how to treat pension as a fixed bill paid from your average month, not your best month.
Pension vs other ways to save
| Option | Strength | Weakness | Best for |
|---|---|---|---|
| RSA (voluntary or micro) | Regulated, long-term, harder to spend impulsively | Access before retirement is restricted; check terms | Money you won't need for years |
| Emergency fund (bank or fintech) | Quick access | Easy to dip into | Sickness, stock shortages, repairs |
| Money market or treasury bills | Short to medium horizon, flexible | Returns and terms vary; do your checks | Goals within one to three years |
| Ajo or esusu | Discipline, community | Depends entirely on trust in the organiser | Lump sums for stock or rent |
| Business reinvestment | Can grow income | Concentrated risk | Sensible, but not instead of a pension |
Your pension isn't meant to be accessible. That's the feature. Use the other tools for goals that come sooner.
Common mistakes to avoid
- Opening several RSAs. This fragments your savings and creates confusion later. One account, one PIN.
- Paying through unofficial agents. Pay into accounts that the PFA confirms in its own channels. If someone collects cash and says they'll "deposit it for you", you've lost control of the money.
- Believing guaranteed-return claims. Pension fund returns move with the market. Anyone promising a fixed, high payout or "double your retirement money" is selling something else.
- Never checking statements. Review your statement at least once a year to confirm every payment landed.
- Setting an amount you can't sustain. Start low and raise it when income grows.
- Ignoring fees. Charges reduce your balance over decades. Ask for them in writing.
How it changes by situation
Freelancers earning in dollars: Your pension account is in naira. That's fine for retirement spending in Nigeria, but if you plan to retire abroad you may want other savings in foreign currency too. See our naira vs dollar savings guide for a simple split.
Daily traders: A weekly payment, even small, may suit you better than one monthly lump. Ask your PFA whether they accept it.
Readers in Ghana, Kenya and South Africa: This post is about Nigeria's system. Other countries run different schemes, with different regulators, tax treatment and rules for self-employed people. Check your own national pension authority before copying any of these steps.
Frequently asked questions
Can I really open a pension account without an employer?
Self-employed people are generally able to, either through a voluntary arrangement or a micro pension plan. Ask a licensed PFA to confirm the current requirements.
Can I withdraw my money if my business fails?
Rules on early access are restricted and depend on the type of contribution. Get the conditions in writing before you pay, and don't put in money you may need within a couple of years.
Which PFA is best?
There's no single answer. Compare fees, service quality, payment convenience and complaint handling, and confirm the company is licensed on PenCom's website.
Is a pension better than buying land or stock?
They do different jobs. Assets you control can grow faster or fail faster. A pension adds a regulated, disciplined layer. Most people do better using both.
Your next step
This week, find out whether you already have an RSA PIN, then message two licensed PFAs with the five questions above. Pick one, make a small first payment and put the next payment date in your phone calendar.
This article is for general information only and is not financial, legal, or tax advice. Prices, rates and rules change quickly, so check current details before making money decisions.