Frequently asked questions on CPS

Who is a closed pension fund administrator (CPFA)?

Any employer managing its existing pension scheme before the enactment of the Pension Reform Act 2004 may apply to the National Pension Commission to be licenced as a Closed Pension Fund Administrator to continue to manage such pension scheme. A closed PFA cannot open or manage RSA for employees other than its employees or employees of its parent company if it is a subsidiary.

 Who is qualified to be licenced as a closed PFA?

Any employer having existing pension fund assets worth N500,000,000 or more who also meets the requirements of the Pension Reform Act 2004 may apply to the National Pension Commission for a closed PFA licence to enable it manage the pension funds of its employees directly or through its subsidiary.

Who is a custodian?

A Pension Fund Custodian (PFC) is a company licensed by the National Pension Commission to keep pension money and assets in the RSA on trust for the employee on behalf of the PFA.

What is the difference between a PFA and a PFC?

The PFA manages and invests the pension funds while the PFC keeps the pension funds and assets in safe custody and carries out transactions on behalf of the PFA.

  Can I move my account from one PFA to another?

An employee or contributor has the freedom to move his account, once a year, from one PFA to another without giving any reason(s). This will become possible when the transfer window opens.

 Will the PFA charge fees for their services?

The PFA will charge fees for the services being rendered on the RSA subject to such guidelines as may be issued by the National Pension Commission from time to time.

How can I be sure that my contributions are safe?

All those managing or keeping custody of pension funds and assets will be licensed and continually regulated and supervised by the National Pension Commission.

 What is the guarantee that the pension funds under the new scheme will be well managed and not diverted for other purposes?

The functions of the Pension Fund Administrator (PFA) and Custodian are clearly spelt out in the Pension Reform Act 2004. The Act provides adequate safeguards against the misuse of the pension funds and assets by any operator.

What happens if a PFA fails or is liquidated?

The pension funds and assets in the Retirement Savings Account (RSA) are kept by the PFC and as such the liquidation of the PFA will not affect the funds and assets. Besides, every PFA is expected under the Pension Reform Act 2004 to maintain a statutory reserve fund as contingency fund to meet claims for which it may be liable as may be determined by National Pension Commission.

Who can I complain to if I have a problem with a PFA?

The Pension Reform Act 2004 allows any employee to complain about any PFA to the National Pension Commission.

What is the role of the government in the new pension scheme?

The Federal Government has established the National Pension Commission and charged it with the responsibility of regulating and supervising new pension scheme.

Can the government take or use the money in my RSA for any purpose?

The Government cannot tamper with the pension funds in your RSA, because the Government cannot have access to the account. Besides, the Government is primarily concerned with ensuring the safety of the money in your RSA through the enforcement of strict rules and regulations.

Will inflation and devaluation of the naira not erode the value of the pension contributions?

It is the duty of the PFAs to administer the contributions and invest in such a way that will ensure safe and reasonable returns on investment. The reserve fund created by the PFAs under the Act would compensate for any erosion of the value of the contributions.

 What is the minimum pension guaranteed under the new scheme?

The minimum pension guarantee shall be determined from time to time by the National Pension Commission.

Is there adequate representation of all stakeholders on the board of the commission, or is it dominated by government appointees?

There is adequate representation of relevant stakeholders in the Board of the National Pension Commission, which comprises of representatives of the Government, Nigeria Labour Congress, the Nigerian Union of Pensioners and the Nigerian Employers’ Consultative Association.

 Does the pension reform act reflect the application of the principles of transparency and accountability?

Yes. The new pension scheme entrenches the principles of transparency and accountability as reflected in the reporting requirement of the PFAs and PFCs to both the contributor and the National Pension Commission. An employee has the right to choose who manages his RSA and the right to receive statements of his account on quarterly basis with details of contributions made and returns on investment.

What is the retirement age under the pension reform act 2004?

The Act did not stipulate any retirement age. It depends on each employee’s terms and conditions of employment.

 What is the minimum period required by an employee to qualify for pension under the new scheme?

There is no qualifying period for pension. If an employee works for an employer for one month, his pension contribution will be paid by the employer into the employee’s Retirement Savings Account (RSA) for that month. If the employee moves on to work for another employer for another 1 year, his pension contribution will be paid by the second employer for that period of 1 year and it goes on and on like that.

When will i have access to money in my RSA?

Access to the RSA will only be allowed upon retirement. If an employee retires at the age of 50 years or more he/she can have immediate access to the RSA. Similarly, if an employee retires before the age of 50 years due to mental or physical incapacity, he or she can have immediate access to his/her RSA. Whereas an employee who retires under the age of 50 years in accordance with the terms and conditions of employment will not access the RSA until after six months of such retirement if he/she does not secure another employment.

Will gratuity be paid under the new scheme?

Upon retirement, an employee can draw a lump sum (by whatever name called) from the balance standing to the credit of his/her RSA provided the balance after the withdrawal could provide an annuity or fund monthly payments that would not be less than 50% of his monthly pay as at the date of his retirement.

However, an employer may choose to pay any other severance benefits (by whatever name called) over and above the retirement benefits payable to the employee subject to the terms and conditions of his employment.

Should gratuity be included in the actuarial valuation for purposes of determining accrued pension rights to be transferred from the old scheme into the RSA?

If at the commencement of the Pension Reform Act 2004, the employee is entitled to gratuity (if he were to retire on that date), the gratuity shall be computed and included in the actuarial valuation as part of the accrued pension rights of such employee.

Can I withdraw any portion of the amount in my RSA before retirement?

Withdrawals from the RSA can only be made upon retirement. However, where an employee makes addition.