PFAs in stiff competition as transfer window hits N710bn

The search for enhanced returns and quality service delivery has spurred not less than 178,164 contributors to move to new Pension Fund Administrators (PFAs) taking advantage of the regulatory transfer window, with a total of N710.89 billion moved across the PFAs at the end of half-year 2023.

The pension transfer window introduced in 2020 by the National Pension Commission (PenCom) allows contributors otherwise called Retirement Savings Account (RSA) holders the flexibility to move their funds from one PFA to another at least once every two years.

Michael Oyebola, in Money Counsellors 2023 annual report on pensions with the theme: ‘Navigate your pension journey with confidence,’ said the transfer window stands as a pivotal opportunity for RSA holders to reassess and optimise their retirement savings managed by their PFAs.

Data from PenCom, according to Money Counsellor, show that from 2,799 RSA holders who transferred to new PFAs in the fourth quarter of 2020, with N18.90 billion, the figure rose to 12, 872 in fourth quarter 2021, with N42.49 billion, and 34,283 in fourth quarter 2022, amounting to N131.79 billion in the same fourth quarter 2022.

For the half-year 2023, a total of 34, 359 RSA holders transferred to new PFAs with the sum of N158.60 billion exchanging hands among the PFAs.

Account holders hungry for good returns, better service

Oyebola said this mechanism offers a pathway for RSA holders to respond to shifting market conditions as well as other measures used to evaluate and measure their current PFAs, ensuring that their investment aligns with long-term financial goals.

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“The transfer window isn’t just a momentary shift but a dynamic tool that empowers RSA holders to make informed decisions based on the performance metrics of their PFAs. As the financial landscape evolves, embracing the transfer window becomes imperative for those seeking to capitalise on optimal fund management, superior returns, and a responsive approach to market changes.”

“In the ever-changing world of finance, the transfer window emerges as a beacon, guiding RSA holders towards empowerment, sustained growth and savings pot that will provide happy retirement.”

Oyebola said, that if your PFA is constantly underperforming the average, then you might be at risk of having a lower retirement nest egg when the time comes to draw your pensions.

On the transfer process, he said, it can be seamless, but critical to the process is that you should have your PIN linked to your account and have completed your data recapture to ensure that your correct information is on the PenCom Enhanced Contributor Registration Scheme (ECRS)

Pan-African credit rating agency and research firm, Agusto & Co reviewing the pension industry said, the increased awareness of the transfer window and its operational mechanisms, coupled with the entry of two holding companies in Nigeria, namely Access Holdings and GTCO Holdings, into the industry will further elevate the level of competition among PFAs as they strive to expand their enrollee base.

Agusto & Co said, “From our perspective, the integration of innovation driven by technology and the enhancement of customer service will serve as pivotal factors in driving the performance of PFAs in the near to medium term.”

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“However, it is important to note that this may not have a substantial impact on the market share dynamics within the industry, as the leading players have consistently maintained their dominant positions, particularly through their innovative utilisation of technology and brand strength. However, Agusto & Co. foresees significant shifts occurring within the ranks of the top five players in the short to medium term.

Olumide Oyetan, chief executive, Stanbic IBTC Pension Managers, describes the transfer window as a positive development for the pension industry as it gives RSA holders the freedom to change their initial PFA to a 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.

“We have carried out significant upgrades across our digital self-service channels and online platform to provide transactional ease and a personalised experience for both new and existing clients. We have also conducted in-house reviews and re-trained staff to equip them with the required skills to harness opportunities presented by the transfer window to grow our market share, Oyetan said.

Afolabi Folayan, executive director, technical, access pensions, said the onset of the transfer window aligns with the rights enshrined in the PRA 2014 and international standards, wherein customers are afforded the freedom to select a pension provider of their choice.

“We view this as a positive development for the industry, as it introduces an element of choice that is conducive to improved service standards and increased innovation among market participants.”

According to him, this shift is expected to drive greater adoption of digital channels as it seeks to provide customers with more comprehensive information regarding their retirement savings.

“Moreover, the possibility of losing customers due to suboptimal investment returns is likely to incentivise PFAs to make substantial investments in personnel, technology, and systems. This, in turn, will facilitate the delivery of enhanced risk-adjusted returns.”