Introduction
EMPLOYEES from the commencement of the Contributory Pension Scheme (CPS) in 2004 opened Retirement Savings Accounts (RSAs) with Pension Fund Administrators (PFAs) in compliance with the provisions of Section 11(1) of Pension Reform Act (PRA). The Section provides that: “Every employee to whom this Act applies shall maintain an Account, (in this Act referred to as “Retirement Savings Account”) in his name with any Pension Fund Administrator of his choice”.
Years into the implementation of the CPS, holders of RSAs (active and retired) became anxious about the performance of some of the PFAs and had been looking for an opportunity that will enable them to decide whether to continue with their original PFAs or change them in line with the provisions of PRA 2014.
Provision of PRA 2014
Section 13 of the PRA 2014 states that: “Subject to guidelines issued by the Commission, a holder of a retirement savings account maintained under this Act may not, more than once in a year, transfer his account from one Pension Fund Administrator to another”.
The Launch of RSA Transfer System
In a press release on Monday, November 9, 2020, the National Pension Commission (PenCom) informed all stakeholders and the general public, especially RSA holders under the CPS, that the Commission has concluded arrangements for the take-off of RSA transfers. Accordingly, RSA holders may transfer their accounts from one PFA to another once a year, in line with Section 13 of PRA 2014.
If an RSA holder is satisfied with the performance of his/her PFA, there is no reason to change the PFA. I advise RSA holders not to immediately commence the process of changing their PFAs without carrying out diligent checks on PFAs. They should also be careful and interrogate every piece of information that marketers of PFAs are going to bring to them; they are coming.
The launch date for the RSA Transfer System is scheduled for Monday, 16th November, 2020. This will signify the official opening of the RSA transfer window.
The press release further states that prior to this launch, PenCom had successfully developed the RSA Transfer Application, a robust electronic platform that would enable seamless RSA transfers. In addition, PenCom had conducted extensive workshops for licensed Pension Operators and State Pension Bureaus in readiness for this epoch-making event.
According to the press release, the activation of the RSA transfer process will engender competition and improve service delivery in the pension industry, while asserting the right of RSA holders to determine which PFA manages their pension contributions and retirement benefits.
Conditions to be fulfilled by RSAs holders for effective transfers of RSAs
The desires of RSA holders who were anxiously awaiting the opening of the transfer window to enable them to transfer their RSAs from one PFA to another has now been granted by PenCom and this will come into effect from Monday, 16th November 2020. PenCom and Pension Operators are ready. The question is: are RSAs holders ready?
The condition precedent to transferring an RSA is that the holder of an RSA would have opened his/her RSA after July 2019. All RSA holders who registered before July 2019 must go for the ongoing Data Recapture Exercise (DRE) being carried out by PFAs in compliance with the directive given by PenCom in August 2019. The essence of the DRE is to ensure that data of all RSA holders are complete, accurate and current.
Before August 2019, the provision of a National Identity Number (NIN), which has complete, accurate and current data of a registered Nigerian, was not one of the requirements for opening of an RSA. NIN became a mandatory requirement in opening of an RSA with effect from August 2019.
In order to fast-track the DRE, PenCom has approved a proposal of the Pension Operators’ Association of Nigeria (PenOp) for an industry Shared Service Initiative (SSI). Consequently, PenOp has engaged agents to conduct the DRE on behalf of all PFAs. In partnership with the National Identity Management Commission, the selected agents will have the ability to carry out NIN registrations seamlessly.
The SSI, initiated by PenOp and approved by PenCom, will help to facilitate the DRE and also facilitate the provision of NIN to RSA holders and retirees.
Is it mandatory to change ones PFA after one year?
It important to state here that it is not mandatory for an RSA holder to change his/her PFA after one year. The law provides that a holder of an RSA may not, more than once in a year transfer his account from one Pension Fund Administrator to another.
If an RSA holder is satisfied with the performance of his/her PFA, there is no reason to change the PFA. I advise RSA holders not to immediately commence the process of changing their PFAs without carrying out diligent checks on PFAs. They should also be careful and interrogate every piece of information that marketers of PFAs are going to bring to them; they are coming.
Implications of the Opening of the Transfer Window to PFAs
In 2004, when employees commenced opening of RSAs with PFAs in compliance with Section 11(1) of PRA 2014, none of the PFAs had a pedigree in the management of pension fund, which employees could rely upon in deciding which one of them was good enough to open an RSA account with. They were all for the first time commencing the management of pension funds after being licensed by PenCom. Employees therefore relied on the marketing strategies of the PFAs.
Several years down the line, from 2004 to date, the one-jacket-fits-all reliance has been torn open. As it is said in day-to-day discussions, the men are being separated from the boys; if they have not already been separated.
The day of reckoning for the PFAs in the area of their service delivery has come. The ALMIGHTY date is Monday, 16th November, 2020. This date is so important because as from that date, RSA holders will have a choice.
PFAs will no longer take their clients, RSA holders, for granted. As pointed out in PenCom’s press release, the activation of the RSA transfer process will engender competition and improve service delivery in the pension industry. There are added services PFAs could have rendered to their clients, which they did not. They now have no choice than to look in those areas, if they have to retain and attract RSAs holders.
The Role of PenCom
While congratulating PenCom for the opening of the long awaited transfer window, we will want to remind PenCom of its responsibility of ensuring that RSA holders are not misinformed by PFAs in their attempt to undo one another as a result of the opening of the transfer window.
Section 83(3) of PRA 2014 provides that: “The Commission shall ensure that all information in brochures, advertisements, promotional materials and claims of Pension Fund Administrators are truthful in every way without omission of any fact which may make the information contained therein misleading, false or deceptive.” PenCom should look out for unethical practices among PFAs.
For the avoidance of doubt, Section 104(C) provides: “A Pension Fund Administrator, Pension Fund Custodian, any person or body who supplies information which he knows to be false or supplies the information recklessly as to its truth or falsity, commits and offence under this Act and shall on conviction be liable to a fine not less than N200,000.00 or to imprisonment for a term of not less than three years or to both such fine and imprisonment for every false or misleading information given and where the offence continues to a fine not less than N100,000.00 for every day the offence continues”.
Conclusion
The long awaited transfer window has been opened with effect from Monday, 16 November, 2020. This policy gives an RSA holder the opportunity to annually review the performance of his/her PFA and a choice as to retain or change the PFA. The policy will engender competition and improve service delivery in the pension industry.
The law places a duty on PenCom as the regulator to monitor and ensure that in an attempt of PFAs to retain and attract RSAs holders, they do not give RSAs holders false and misleading information and where they do, the law also provides appropriate sanctions.
