PenCom directs life insurers to transfer annuity funds to PFC’s

Pension regulator, the National Pension Commission (PenCom) has directed all life insurance companies currently providing annuity for retirees under the Contributory Pension Scheme (CPS) to transfer all the funds in their kitty to Pension Fund Custodians (PFC). They are also to open an operational account jointly with a PFC of their choice and do the transfers within three months.

The annuity fund for life insurers, which has grown tremendously in the last two years, following aggressive marketing by operators, is said to stand at about N145 billion premium, with 29, 620 retirees collecting monthly annuity payments as at first quarter 2016.

Annuity by life insurance companies is one of the retirement benefit options alongside programmed withdrawal provided by Pension Fund Administrators, a provision  under the Pension Reform Act. It is jointly regulated by the PenCom and the National Insurance Commission (PenCom).

PenCom in a circular dated November 3 and signed by MB Umar, head Surveillance Department said, “In order to ensure consistency with the Pension Reform Act (PRA) 2014 and to strengthen the processing of administration of retirement benefits, the commission has resolved that the custody of retiree life annuity shall henceforth be domiciled with Pension Fund Custodians (PFC) as provided for in section 56 of PRA 2014”.

According to the circular, the approval of new requests for annuity is hereby put on hold with immediate effect, until life insurance companies meet the custody and transfer conditions.
Meanwhile, insurance operators have reacted to the development, describing it as inimical to their business.

A top executive in the industry said  if PenCom goes ahead to implement the mandate, Pension Fund Administrators (PFAs) would leverage it to de-market annuity business, a development which would not be good for pension benefit operations in the country.

The executive noted that the association is engaging the National Insurance Commission (NAICOM) to see that the circular is withdrawn, stressing that the association would also reach out to PenCom to resolve the issue.