Pension contributors navigate maze of PFAs for better returns

The quest for higher returns and better service delivery are driving mass movement of pension contributors to other Pension Fund Administrators (PFAs) under the newly approved transfer window.

BusinessDay findings show that PFAs that have remained conservative, sluggish in carrying their contributors and retirees along in terms of engagement and communications are largely being affected.

According to latest figures released by the National Pension Commission (PenCom), the number of contributors that have moved has risen by 353 percent to a total of 12,681 in the Transfer Quarter that ended March 31, 2021, from a total number of 2,799 Retirement Savings Account (RSA) holders in the maiden Transfer Quarter that ended December 31, 2020.

PenCom says the number more than quadrupled in the last transfer quarter, and expect consistently upward trend, as RSA holders continue to realise the ease with which they can initiate the transfer of their RSAs.

“Overall, the opening of the RSA Transfer Window is revolutionary. Going forward, high standards of service delivery will be a focal point in the Pension Industry,” the industry regulator states.

Most of the movement is happening in RSA FUND II, which is the default fund for all Active Contributors who are below 50 years old, an industry source says.

The PenCom notes in a statement that the launching of the RSA Transfer System (RTS) on November 16, 2020, heralded the full implementation of one of the cardinal features of the Contributory Pension Scheme (CPS), the portability of RSAs.

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“By this development, RSA holders have been empowered to move their RSAs from their current PFAs to other PFAs of their choice, whenever they desire to do so,” it notes.

According to the Commission, the opening of the ‘Transfer Window,’ as it is popularly referred to, has been embraced by a large number of RSA holders in their quest for better service delivery and returns on investment from PFAs.

“The Commission has ensured that the requirements for initiating RSA transfers are minimal, and has also been made available on its website, necessary information to guide RSA holders through the process. Specifically, its publication of the ‘Frequently Asked Questions’ on RSA transfers, provides RSA holders with all they need to know about RTS.

“The RTS is a fully automated, efficient and transparent process that has pre-defined timelines. It ensures hassle free movement of RSAs across PFAs,” Commission.

As the transfer of RSAs involves movement of pension assets between PFAs, the entire process attracts the full weight of the Commission’s regulatory surveillance, the PenCom notes. The fact that the process has been completely free of charge has also given RSA holders an added advantage, it states.

“The overwhelming response by RSA holders to the opening of the RSA Transfer Window is, therefore, not surprising. In the maiden Transfer Quarter, which ended on 31 December 2020, a total number of 2,799 RSA holders transferred their RSAs to various PFAs. This number more than quadrupled in the next Transfer Quarter, which ended on 31 March 2021, as a total number of 12,681 RSA transfers took place,” the Commission discloses.

According to Olumide Oyetan, chief executive, Stanbic IBTC Pension Managers, in an interview with BusinessDay recently, the transfer window is a positive development for the pension industry as it gives RSA holders the freedom to change their initial selection of a PFA to their preferred service provider based on attributes that are important to them.

“For us as a company, the transfer window has given us the opportunity to welcome new clients and continually improve our technology and services to meet most of our clients’ needs,” he said.

Leveraging our various educative programmes, the transfer window also gives us the opportunity to enlighten a wider audience, thereby boosting confidence in the Nigerian pension industry as well as the larger financial services industry, he stated.

Ibrahim Alhassan Babayo, chairman, Board of Directors, Premium Pensions Limited, said during the company’s annual general meeting that the long-awaited Transfer Window had shifted power to the contributors as they now have the opportunity to switch from one PFA to another.

The opportunities to move when dissatisfied have an implication on Assets under Management (AUM), though reported that Premium Pension Limited was a net gainer during the maiden Transfer Window quarter, he said.

A consistently upward trend is anticipated, as RSA holders continue to realise the ease with which they can initiate the transfer of their RSAs. Overall, the opening of the RSA Transfer Window is revolutionary. Going forward, high standards of service delivery will be a focal point in the Pension Industry.

According to the provisions of the Act that established the Scheme, the objectives of this scheme is to ensure that every person who worked in either the public service of the Federation, Federal Capital Territory, states and local government or the private sector receives his retirement benefits as and when due; and to assist improvident individuals by ensuring that they save in order to cater for their livelihood during old age.

In the case of the private sector, the Scheme shall apply to employees who are in the employment of an organisation in which there are three or more employees.

Notwithstanding the provision of subsection (2) of this section, employee of organisation with less than three employees as well as self-employed persons shall be entitled to participate under the scheme in accordance with guidelines issued by the Commission.

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