All you need to know about investing your pension funds yourself

Securing a comfortable future with your pension funds is important. While these funds represent your future, making the most of them can give you an enjoyable retirement. And, considering how it is crucial to start planning early, there’s a need to prioritise investing your pension funds now. 

These days, you can certainly influence the size of your retirement funds in many ways. This article will walk you through ways you can invest your funds and tips to consider before investing.  

Things to note before investing your pension funds 

Deciding to invest your pension funds is a big step that requires careful consideration. To ensure financial security during retirement, here are important points to note:

• Understand your risk tolerance: Before investing your pension, you need to assess your comfort level with risk. While younger individuals might tolerate higher-risk investments with growth potential, older investors may prefer safer options.
• Diversify your portfolio: As the aphorism says, “Don’t put your eggs in one basket,” it is advisable that you put your pension funds into diverse portfolios. This could be across stocks, bonds, mutual funds, real estate, or other options to minimise risk.
• Long-Term Focus: Avoid making rash decisions based on short-term trends, as pension investments are long-term and for your future. 
• Understand Regulations: Familiarise yourself with organisations governing investments in Nigeria, such as the Securities and Exchange Commission (SEC) and the Nigerian Exchange Group (NGX).

Accessing your pension funds

According to the National Pension Commission (PenCom), a Retirement Savings Account (RSA) can only be accessed upon retirement or at the minimum age of 50. Only on peculiar occasions, such as mental and physical incapacity, mortgage acquisition or retirement before age 50, can an individual access his RSA.

Also, a person who is temporarily out of employment can apply for 25% of his/her pension funds to provide financial relief during this period. Such persons must be out of employment for four months before an application can be submitted for a 25% payment of the pension balance. This application type can only be made once.

For voluntary contributions under the pension scheme, the case is different. Section 4 (3) of the Pension Reform Act 2014 allows active employees under the Contributory Pension Scheme (CPS) to contribute voluntarily in addition to the mandatory contributions into their respective RSAs.

This will help them augment their pensions at retirement.

In this case, the timeframe for withdrawal from a voluntary account is once every two years from the last approved withdrawal date. Employees only have access to 50% of the funds, and withdrawals are calculated on the incremental contributions from the date of the last withdrawal.

This means that when a withdrawal is made, the calculation considers the contributions made since the last withdrawal.

How much of your pension funds can you withdraw upon retirement?

After retirement, you can access up to 50% of your Retirement Savings Account (RSA) balance as a lump sum (one-off payment).  The remaining balance in your RSA must be sufficient to purchase an annuity or fund a programmed withdrawal.

An annuity provides a regular, guaranteed income throughout your lifetime, while a programmed withdrawal distributes the remaining funds over a while. The annuity or programmed withdrawal must provide an income that is at least 50% of your pre-retirement salary.

However, if your RSA balance is less than N550,000, you can potentially withdraw the entire balance as a lump sum. 

How to withdraw your pension funds

To withdraw from your RSA, you need to 

• Notify your Pension Fund Administrator (PFA) of your intention to withdraw. 
• Provide the required documents, which may include a retirement verification slip, evidence of pension rights, and a bank confirmation of your account.

Note that all withdrawals, particularly before retirement, are subject to approval by the PenCom.

Investment Options

Now, let us get to the high point of the conversation. The following are investment platforms you can consider for your pension funds.

1. Bonds

One of the ways to invest your pension funds is through Bonds. A bond is simply a fixed-income instrument representing a loan made by an investor to a borrower that’s typically a corporate or government entity. Also, Bonds are effectively loans where the investor is the creditor. 

When you buy a bond, you loan your money to the government, a corporation, or a municipality. The borrower agrees to pay you interest for an agreed period, and when the bond matures, your principal is returned to you.

The interest income, or yield, you receive from a bond can be a steady source of retirement income.

Bonds have quality ratings to give you an idea of the financial strength of the issuer of the bond. There are short-term, mid-term, and long-term bonds. There are also bonds with adjustable interest rates, called floating rate bonds, and high-yield bonds, which pay higher coupon rates but have a lower quality rating. Bonds can be purchased as a package in the form of a bond mutual fund or exchange-traded fund (ETF), or you can buy individual bonds.

In retirement, individual bonds can form a bond ladder with maturity dates to match your future cash flow needs. This investment structure is often referred to as asset-liability matching or time-segmentation.

The principal value of bonds will fluctuate as interest rates change. In a rising interest rate environment, you can expect existing bond values to go down. If you plan on holding the bond to maturity, principal fluctuations won’t matter. If you own a bond mutual fund and need to sell it to use the funds for living expenses, principal fluctuations will matter.

How this works 

With your pension funds, Bonds can be purchased through the primary market (where freshly issued bonds are sold) or the secondary market (where pre-owned bonds are traded).

You will need to work with a Primary Dealer Market Maker (PDMM) licensed to sell and buy bonds. A primary dealer is a firm that buys government securities directly from the government, to resell them to others, thus acting as a market maker of government securities.

Licensed PDMMs in Nigeria include Access Bank Plc, Ecobank, First Bank, Zenith, UBA, Stanbic, and so on.

The minimum required investment amount is N50,000,000.00, but you can invest small amounts through a mutual fund or ETF. ETFS are listed on the Nigerian Stock Exchange (NXG) and provide investors with the opportunity to diversify their investments at relatively lower costs. With ETFs, you can track global, country-specific, and asset-specific indices.

Alternatively, you can consider the FGN Savings Bonds for your pension funds. They are offered monthly through a subscription process and are accessible to retail investors. To get involved, you’ll open a Central Securities Clearing System (CSCS) account through a stockbroking firm to lodge the FGN Savings Bonds. Some bonds may have a put provision, allowing investors to sell the bond back to the issuer at a specified price before maturity. 

Notably, a prospectus will be provided by the SEC. It outlines the details of the bond offering, including the issuer, investment terms, and how the funds.

It’s crucial to use a broker who specialises in bonds to navigate the market and ensure a smooth investment process for your pension funds. Also, it’s advisable to buy bonds for the income they produce or for the guaranteed principal you will receive when they mature. Don’t buy them expecting high returns or expecting to make a gain on capital appreciation.

2. Shares

Shares are another investment option for your pension funds. Shares are also called ‘stocks’ or ‘equities’. They are units of ownership in a quoted company. The owner is called a shareholder, is entitled to receive regular interests on investment, called dividends, and has voting rights.

Owning shares in a company means a shareholder has power that is equivalent to the amount of stock held in the company. This means an investor who buys 100 units of shares has a greater ownership stake than another investor who holds 20 units.

How this works

Share prices are fixed by the forces of demand and supply, usually fueled by the trading activities of individual stockbrokers.

To buy and sell stock and other securities on the Nigerian stock exchange, an investor would need a licensed stockbroker who would trade on their behalf. Another option is to trade remotely through direct market access.

How to buy shares with your pension funds

With your pension funds, the process of buying shares in the NGX is simple nowadays and even easier and cheaper to buy stock through an online brokerage firm. 

1. Find a Stockbroker that matches your investment goals: Stockbrokers serve as intermediaries between the stock exchange and individual investors. It is imperative to ensure that a stockbroker is licensed by the SEC before proceeding to open an account with them. Check their brokerage fees too, to see if it is within your budget or not.

See the table below for the top 10 stockbrokers in Nigeria in 2025

Rank	Stockbroker	Volume	% of market volume
1	Cardinalstone securities limited	70.04 Billion	49.63
2	Chapel Hill Denham Securities LTD	7.34 B	5.20
3	Apt securities and funds	5.39 B	3.57
4	Morgan Capital Securities Limited	4.75 B	3.37
5	CSL stockbrokers limited	4.03 B	2.86
6	Meristem stockbrokers limited	2.82 B	2.00
7	Cordros securities limited	2.45 B	1.74
8	Stanbic IBTC stockbrokers limited	2.39 B	1.70
9	Finmal finance company limited	1.74 B	1.23
10	EFG Hermes Nigeria limited:	1.66 B	1.18

Fintech platforms such as Bamboo, Risevest, Chaka, and Trove also serve as stockbrokers. This will be discussed in another section of this article.

2. Register and create an account with your preferred brokerage company: Opening an account with a broker takes anything between 3 hours to 2 days, depending on the firm and compliance with KYC policy.

Online brokerage accounts take a shorter time to process. The requirements to open a verified brokerage account are a Bank verification number (BVN), Recent proof of address (utility bills such as water bills, and electricity bills), and a valid government-approved means of identification (National identity card, driver’s licence, international passport). 

3. Fund your account: After creating a verified account with a stockbroker, you would need to fund your account with your pension funds, which would be used for trading. Some brokers allow direct bank transfers from your bank to theirs.

To understand their services and make trading easier, you can download a broker’s app to your phone or PC. For online brokers, the app is their trading platform, and it is necessary to download the app to help you easily monitor your trade and price fluctuations.

4. Trading: This is a crucial step when buying shares in Nigeria. You should clearly understand the securities you are investing in, beforehand. The reason is that there are risks attached to each investment. For example, if an investor wishes to buy and hold shares of company ABC, it is advisable to first consult an expert or at least research and study the trading history of that company. 

5. Manage your investment portfolio: After successfully buying shares in the Nigerian stock exchange with your pension funds, you need to monitor your trading account for price fluctuations and make decisions on whether to buy, sell, or hold stock.

3. Closed-end funds 

Closed-end funds are funds that have a fixed number of shares available, meaning they do not issue or redeem shares after the initial offering. It is called closed-end funds because new shares are rarely issued once the fund has been launched, and because shares are not normally redeemable for cash or securities until the fund liquidates.

Investing your pension with closed-end funds involves purchasing shares through an initial public offering (IPO) or in the secondary market on the Nigerian Exchange (NGX). After the IPO, shares can be bought and sold like any other stock, reflecting market forces. Closed-end funds raise a fixed amount of capital through the IPO and do not issue new shares once launched.

Some characteristics that distinguish a closed-end fund from an ordinary open-end mutual fund are that it is closed to new capital after it begins operating, i.e. they do not continue to sell new shares endlessly as mutual funds do.

Its shares trade on stock exchanges rather than being redeemed directly by the funds. Closed-end funds trade continuously at whatever price the market dictates (it can trade at a premium or discount to NAV), while open-end funds can only trade at Net Asset Value (NAV).

How Closed-end funds work:

• A fixed number of units is issued to the public at the IPO, raising capital for the fund’s investment portfolio. 
• The fund manager invests the raised capital according to the fund’s investment objectives. 
• Fund units are listed and traded on the NGX, allowing investors to buy and sell them at the market price.
• As there is no direct redemption, investors cannot directly redeem their units for cash from the fund manager after the IPO. 
• To exit your investment, you need to sell the units on the NGX through your stockbroker. 

4. REITs

Another way to invest your pension funds is through the Real Estate Investment Trusts (REITs).

REITs are corporations or trusts that use the pooled capital of many investors to purchase and manage income property and/or mortgage loans. REITs are traded on NGX like stocks.

Using your pension funds, you can buy or sell them through your stockbroker, as with other types of shares. A stockbroker buys and sells stocks on behalf of investors. 

REITs offer tax advantages to investors and provide a liquid way to invest in real estate by allowing investors to share in non-residential properties like hotels, malls, and industrial properties. It requires no minimum investment and does not necessarily increase or decrease in value along with the broader market.

They are a typical example of closed-end funds.

To get started, 

• You need to open a Stock Brokerage Account with a licensed broker in Nigeria. 
• Thoroughly research available REITs, considering their portfolio, management, and historical performance. 
• Once you’ve selected a REIT, you can buy its shares with your pension funds. This is done through your brokerage account, where you’ll receive dividends from the REIT, proportional to your shareholding. 
• You must keep track of the REIT’s performance and make adjustments to your portfolio as needed.

Examples of Nigerian REITs are Union Homes REIT, UPDC REIT, and Skye Shelter Fund. 

Final words

While this article might only serve as a first point of contact or a developing note, it’s essential that you seek more guidance from experts and experienced close associates before investing your pension funds. As life itself is a continuous learning process, so is investment.

Importantly, investing early is crucial for bigger returns. Don’t gather knowledge to apply it in the years to come. The longer you save, the bigger your pension pot might be later on.