Pension and NHF in Nigeria: How Much Comes Off Your Salary?

If you look at your payslip, you will notice two deductions most Nigerians do not fully understand: pension and NHF. Together they take 10.5% of your basic salary before tax is even calculated. Here is everything you need to know about how these deductions work in 2026.

Pension Contribution: The 8% Rule

Under the Pension Reform Act, every employee in the organized sector must contribute to a Retirement Savings Account (RSA). The breakdown is:

• •Employee contributes: 8% of your basic salary, housing, and transport allowance
• •Employer contributes: 10% of the same
• •Total: 18% of your qualifying income goes into your pension

Your 8% is deducted from your salary before PAYE tax is calculated. This means it reduces your taxable income and saves you money on tax.

Example:

If your basic salary plus housing and transport is NGN 300,000 monthly:

• •Your pension deduction: 8% × NGN 300,000 = NGN 24,000
• •Employer adds: 10% × NGN 300,000 = NGN 30,000
• •Total into your RSA: NGN 54,000/month

Over 30 years at average returns, this builds into a substantial retirement fund.

Pension Contribution Cap

There is a monthly cap on pensionable income. If your basic + housing + transport exceeds NGN 400,000, only the first NGN 400,000 is used for pension calculation. Your maximum employee contribution is NGN 32,000/month.

NHF: The 2.5% You Cannot Opt Out Of

The National Housing Fund (NHF) is a mandatory 2.5% deduction from your basic salary. It is managed by the Federal Mortgage Bank of Nigeria and is meant to provide affordable housing finance.

How NHF Works:

• •Rate: 2.5% of your basic salary
• •Mandatory: Yes, for all employees earning above the minimum wage
• •Purpose: Funds are used to provide mortgage loans at low interest rates
• •Claim: You can apply for an NHF loan after contributing for 6 months

NHF Example:

Basic salary of NGN 200,000:

• •NHF deduction: 2.5% × NGN 200,000 = NGN 5,000/month
• •Annual NHF: NGN 60,000

Can You Get NHF Back?

If you are not interested in NHF mortgage loans, you can apply for a refund after retirement or after a period of unemployment. However, the refund process is notoriously slow.

How Pension and NHF Affect Your Tax

Both pension and NHF are deducted from your gross income BEFORE tax is calculated. This is important because it means:

1. •They reduce your taxable income
2. •Lower taxable income = lower PAYE
3. •You pay less tax overall because of these deductions

For a higher earner, pension and NHF deductions can save significant tax money. A person earning NGN 5 million annually saves roughly NGN 150,000-200,000 in tax through pension and NHF deductions.

Verifying Your Employer Is Doing It Right

Many employers in Nigeria are not remitting pension and NHF contributions properly. Some deduct the money but do not send it to your RSA or the NHF. Here is how to check:

For Pension:

1. •Open your RSA statement (request from your Pension Fund Administrator — PFA)
2. •Check that monthly contributions match your payslip
3. •Verify your employer's 10% is also being remitted
4. •If contributions are missing, your employer is breaking the law

For NHF:

1. •Request your NHF contribution statement from the Federal Mortgage Bank
2. •Verify contributions match your payslip deductions
3. •Keep all payslips as evidence

What To Do If Your Employer Is Not Remitting:

• •First, raise it with HR in writing
• •If unresolved, report to PenCom (for pension) or the Federal Mortgage Bank (for NHF)
• •PenCom has been increasingly aggressive about enforcement

Taxee Calculates Everything

Pension, NHF, and PAYE are all interconnected. Getting one wrong means your tax is wrong. Taxee handles the full calculation including pension and NHF deductions for every state.

See your full salary breakdown →