The Nation Newspaper

Tag: PenCom

  • PenCom to workers: report defaulting employers

    PenCom to workers: report defaulting employers

    • Defaulting employers remit N25.45b in 12 years

    The National Pension Commission (PenCom) has charged workers to report employers who fail to remit their deducted pension, The Nation has learnt.

    The Director-General, PenCom, Mrs. Aisha Dahir-Umar, stated this in a report.

    She said the Commission is taking legal steps to recover pension contributions.

    Cumulatively, she said last year PenCom recovered N1.47 billion from defaulting employers, with N864.69 million recovered as principal contributions and N608.90 million as penalty for the non-timely remittance of the contributions.

    She said PenCom prosecutes recalcitrant employers who default in the remittance of pension contributions, adding that from 2013 to 2024, PenCom recorded 1,073 recalcitrant employers.

    She also said legal proceedings had been commenced against 138  employers of which 68 of the cases in court have been concluded while that of 642 defaulting organisations are being resolved since litigation is carried out only when resolution efforts fail to achieve compliance.

    Read Also; Tinubu appoints Garba Laka Counter-terrorism center coordinator

    Mrs. Dahir-Umar urged employees to report employers who are not  remitting the full 10 per cent and eight per cent employee components of the contributions.

    She emphasised that the Pension Reform Act 2014 (PRA 2014) provides that every employee shall maintain a Retirement Savings Account (RSA) with any Pension Fund Administrator (PFA) of choice.

    Once an RSA is opened, she stressed that it is the responsibility of the employee to inform the employer by submitting the RSA Personal Identification Number (PIN) issued by the PFA.

    She said: “Subsequently, the employer is required to remit an amount comprising at least eight per cent employee and 10 per cent employer contribution to the Pension Fund Custodian (PFC) specified by the PFA of the employee. Also, the PRA 2014 mandates employers to remit pension contributions not later than seven working days from the day salaries are paid to employees.

    “Employers failing to or delaying in remitting their employees’ pension contributions are flouting the PRA 2014. We have put in place a mechanism to recover pension liabilities, including penalties, from defaulting employers and so we encourage employees to report their employers, who are not remitting pension contributions into their Retirement Savings Accounts (RSAs) as required by the PRA 2014. We allow employees to anonymously report their defaulting employers. When such complaints are received, the employers are compelled to remit the principal contributions with penalties.

    PRA 2014

    The PenCom DG said: “Section 11(6) of the PRA 2014 states that an employer who fails to deduct or remit the contributions within the stipulated time frame of seven working days from the day salaries are paid shall, in addition to making the remittances already due, be liable to a penalty.

    “This penalty shall not be less than two per cent of the total contributions that remain unpaid for each month or part of each month the default continues. The amount of the penalty shall be recovered as a debt owed and paid into the employee’s RSA. Employers should be mindful that promptly remitting pension contributions is more cost-effective than risking penalties due to non-compliance or delayed remittance, as such penalties can be substantial.

    “In addition, the PRA 2014 empowers PenCom to authorise the examination, inspection, or investigation of an employer relating to pension funds or assets.This provision ensures compliance by employers and mitigates complaints from employees and PFAs on non-remittance of pension contributions by some employers.”

    Reporting non-remittance of pension

    “Employees have a role to play to ensure that they get their pension in line with the PRA 2014. PenCom strongly encourages employees to report instances of pension contribution default. The affected employee is required to provide details of the employer and history of the default, including attaching an RSA statement showing gaps in remittances.This comprehensive information will facilitate a detailed investigation.”

    Recovery agents

    She continued: “PenCom has appointed Recovery Agents to carry out the examination of private sector employers to determine their level of compliance. The recovery of outstanding pension contributions carried out by appointed Recovery Agents (RAs) commenced in July 2012, and there are 28 RAs engaged currently by the Commission as of January 2024. The exercise sets out to achieve, amongst others, the recovery of all unremitted pension contributions of employees with penalties to ensure that affected employees do not lose any income that they would have earned from the investment of the funds, secure full compliance of organisations with the PRA 2014, and also reduce complaints of non-remittance of pension contributions by employees, thereby boosting confidence and acceptability of the Contributory Pension Scheme (CPS). PenCom and PFAs bear the recovery cost due to RAs, as it comes at no cost to RSA holders.

    “The recovery process requires the RA to diligently follow the outlined steps, which commences with obtaining a list of assigned defaulting employers and letters of introduction from PenCom to the employer. The RA is granted access by the employer to conduct a thorough review of pension records to determine the pension liabilities. Thereafter, the RA serves demand notices to the employer to remit the outstanding pension liabilities and penalties.

    “Consequently, the RA follows up with the defaulting employers to ensure remittances of outstanding pension contributions. Evidence of payments is obtained and forwarded to PenCom for onward confirmation by the PFCs.

    “The recovery process is still ongoing, and substantial outstanding contributions and penalties are being recovered from employers. This is an indication of PenCom’s increased enforcement of compliance with the CPS by employers.’’

  • ‘PenCom didn’t give Fed Govt  N10tr loan’

    ‘PenCom didn’t give Fed Govt  N10tr loan’

    • Agency not a bank, says DG

    National Pension Commission (PenCom) is not a bank that warehouses funds or gives loans, its Director-General  Mrs. Aisha Dahir-Umar said at the weekend.

    According to her PenCom is not a custodian of retirees funds or a body in charge of disbursement.

    She said contrary to assumption, pension fund assets are not managed by PenCom.

    She, however, attributed delay in payment of retirement benefits to some Federal Government retirees and deceased employees to late payment of Accrued Pension Rights

    The Director-General made the clarifications during an interactive session with the media against the backdrop of insinuations that PenCom had warehoused N15trillion pension funds.

    She said: “Apart from the fact that PenCom is not a bank and does not warehouse or manage pension funds, the Federal Government did not take a loan of N10 trillion from the commission.

    “Moreover, pension fund assets are not managed by PenCom. I have said it repeatedly that when we say pension assets have grown to N15 trillion, that does not mean PenCom has N15 trillion locked somewhere in its office or bank accounts.

    “Pension fund assets are managed by the licensed Pension Funds Administrators (PFAs) and held in custody by the licensed Pension Fund Custodians (PFCs). The PFAs are responsible for investing pension fund assets in allowable asset classes, including the Federal Government of Nigeria (FGN) debt instruments.

    “The objectives are safety and fair returns. All these are in line with the provisions of the enabling law, the Pension Reform Act 2014, and the rules issued by the commission.”

    She added: “It is obvious from the above that what is referred to ‘loan to FGN’ is just investment in FGN securities by the PFAs, as is done by other institutional investors such as banks, insurance companies, asset managers, etc.

    “Investments by the PFAs in the securities of the Federal Government of Nigeria (FGN) are not loans as erroneously portrayed, but investments in securities, through bonds and treasury bills, as approved by the relevant government agencies, in this case the Debt Management Office (DMO) and Securities and Exchange Commission (SEC).

    “They are traded on authorized capital markets. That is, the Nigerian Exchange Limited and FMDQ OTC Securities Exchange.”

    She also responded to claims that PenCom was owing Federal Government retirees arrears of pensions as well as insinuations that Pension Fund Administrators (PFAs) are not fulfilling their obligations to retirees.

    Mrs. Dahir-Umar said it is an “international best practice to invest in investible instruments issued or backed by the sovereign authority and that the FGN securities meet the objectives of safety and fair returns.”

    But she said there is no cause for alarm on pension fund assets because the Federal Government has been meeting its obligations.

    Read Also: Tension as Senate meets over N3tr alleged padding of 2024 budget on Tuesday

    “The FGN has consistently met its repayment obligations, both principal amount and accrued interest, for all investments in bonds and T-bills to all investors including pension funds.

    “The information is always in the open and accessible on our website, www.pencom.gov.ng,” she said.

    The PenCom DG gave further explanation on outstanding benefits to Federal Government retirees.

    She said: “The delayed payment of retirement benefits to some Federal Government retirees and deceased employees is because of the inadequate and delayed funding for the payment of Accrued Pension Rights for those who were in service before the Contributory Pension Scheme (CPS) was introduced when PenCom was established in 2004.

    “Payment of the accrued rights is subject to release of funds by the Federal Government. So, it is beyond the powers of the Commission. However, we have been engaging the Federal Ministry of Finance for more funds to be released to settle these liabilities, but it is not a secret that the government itself has budgetary constraints.”

    She said all those enrolled under the CPS had been receiving their benefits through their PFAs and there was no such complaint before the commission.”

  • Some PFAs not remitting workers’ contributions, says PenCom

    Some PFAs not remitting workers’ contributions, says PenCom

    Some pension fund operators have been fingered in un-credited pension contributions, poor service delivery and maintenance of contributors’ records.

    According to a report by the National Pension Commission (PenCom), the lapses were observed during its surveillance.

    Giving update on the On-Site Examinations of Licensed Pension Operators as at last September 30, the commission said it carried out the audit of 18 Licensed Pension Operators (LPFOs).

    Its report read: “The examination covered six significant areas: pension assets management, fund accounting and valuation, pension administration, benefits administration, information and communication technology and customer support services.

    “Relatively, the activities of the LPFOs were in accordance with the legislation and sub-legislations. However, some observed lapses with regards to huge un-credited contributions, service delivery and maintenance of contributors’ records, were highlighted during the examination and are being addressed by the operators.’’

    Meanwhile, the commission also carried out the supervision of the Pension Transitional Arrangement Directorate (PTAD).

    Read Also: No Nigerian should be in captivity, Speaker Abbas tells security agencies

    “Ten Defined Benefits Scheme-related complaints were received within the quarter, all of which have been forwarded to PTAD for resolution.

    “In addition, the Commission attended PTAD’s 2023 customer service celebration  at its Head Office located in Abuja on the 3rd of October 2023.

    Similarly, PenCom gave an update on the Nigeria Social Insurance Trust Fund (NSITF).

    “The Commission received 25 batches of NSITF transfer applications from Trustfund Pensions Limited (Trustfund) on behalf of 236 NSITF members requesting for the transfer of N13.29 million into their Retirement Savings Account (RSAs).

    “The requests were reviewed and approval was granted to Trustfund to transfer N12.27 million into the RSAs of 233 members registered with various Pension Fund Administrators while the three outstanding requests were returned to Trustfund having not met  the necessary requirements for the transfer of their NSITF contributions,” the report stated.

  • CPS is sustainable, transparent, says PenCom

    CPS is sustainable, transparent, says PenCom

    Few reforms have held as much promise and significance as the transition from the old Defined Benefits Scheme (DBS) to the Contributory Pension Scheme (CPS), the Director-General (DG), National Pension Commission (PenCom), Mrs. Aisha Dahir-Umar, has said.

    Mrs. Dahir-Umar, who made this known in a statement, said it has introduced sustainability and accumulation of funds, savings’ culture, individual retirement savings account, transparency, among others.

    According to her, the shift from the DBS to the CPS has been transformational in the country’s pension system.

    She maintained that the CPS is inevitable, given the issues in the old DBS.

    The DG noted that the CPS has reformed pension administration in Nigeria so that workers are assured of getting retirement benefits.

    The CPS has brought innovations that transformed the pension system, she added.

    Sustainability and accumulation of long-term funds

    Mrs. Dahir-Umar stated that sustainability is a major concern globally in terms of pension and retirement benefits for retirees.

    She said: “The DBS, fraught with inefficiencies and fiscal burdens, has proven unsustainable as the burdensome nature of funding pensions from the government coffers has led to arrears, delayed payments, and even pension crises.

    “Prior to 2004, when the CPS was introduced, Nigeria grappled with a pension deficit of over N2 trillion.

    “However, under the CPS, Nigeria has accumulated N18.36 trillion pension assets as at December 31, 2023, which is a clear testament to the scheme’s sustainability.Thus, the CPS has directly fulfilled the objective of transferring resources and pooling funds efficiently and effectively. The pooling of funds for long-term investments significantly impacts capital formation and investments.

    “The introduction of the CPS was in realisation that Nigeria could not afford to continue down the path of unsustainable pension arrangements, which the DBS embodied and represents in states that are yet to implement the CPS.”

    Individual retirement savings account

    One of the benefits of the CPS, she said, is that employees open individual Retirement Savings Accounts (RSA), where contributions are accumulated till retirement.

    “Consequently, once an employee retires from active service, funds are available for payment of their retirement benefits.The CPS permits employees to make voluntary contributions from their salaries to boost their RSA balance.The mandatory requirement that PFAs provide regular/periodic statements of accounts to contributors ensures that RSA holders are informed on the progress of their RSAs, especially when their employers pay pension contributions.”

    Transparency

    She continued: “The CPS offers a more resilient framework, where pension funds are managed prudently, invested wisely, and insulated from the vagaries of political and economic instability. Evidently, the CPS offers numerous advantages over the old scheme. It fosters transparency, accountability, and individual ownership of retirement savings. RSA holders receive contribution alerts and periodic statements detailing contributions and returns on investments.”

    Shared responsibility

    “The CPS clearly shares responsibilities between employers and employees, and contributions are made by all parties, with employers required to pay a higher percentage of contributions than employees. Additionally, PenCom provides oversight and regulatory frameworks to safeguard pension funds, ensuring their prudential management and investment.

    Inclusivity and equity

    “The CPS promotes inclusivity and equity, catering to the needs of  formal and informal sector workers. By extending coverage to previously excluded groups, such as the self-employed and casual workers, the scheme fosters social cohesion and economic empowerment across all segments of society. Unlike the exclusive nature of the DBS, which primarily benefits public sector employees.The CPS extends coverage to workers across all sectors, including the informal economy. Through the Micro Pension Plan (MPP), which caters specifically for players in the informal sector, the scheme ensures that no one is left behind in the journey towards financial security in retirement and old age.

    Read Also: CPS: How PenCom is growing pension assets

    Mobility of labour

    “The CPS facilitates labour mobility across sectors and different tiers of government. Once an RSA is opened and a Personal Identification Number (PIN) is issued to an employee, the PIN is tied to the employee for life.Thus, when an employee moves from one employer to another, it suffices for him only to provide the new employer with his PIN and PFA.

    Savings culture

    “The CPS promotes a culture of savings, investment, and long-term financial planning—a paradigm shift from the dependency mentality perpetuated by the DBS. By empowering individuals to take control of their retirement savings and make informed investment decisions, the scheme not only secures their future but also stimulates capital formation and economic growth. This virtuous cycle of savings and investment creates a ripple effect across the economy, spurring entrepreneurship, innovation, and wealth creation.

    Contributors’ rights

    “Firstly, the CPS allows participants to select any PFA of their choice to open their RSA.

    “Secondly, the right of RSA holders to transfer their RSA from one PFA to another once a year is guaranteed by the Pension Reform Act 2014.

    “Thirdly, participants retiring under the CPS can decide on their retirement benefit payment mode—the Programmed Withdrawal (PW) or Retiree Life Annuity (RLA).

    “Furthermore, employees in service before 2004 are assured of their pensions earned under the DBS, through the payment of Accrued Pension Rights.

    “This represents an employee’s benefits for the past years of service up to June 2004, when the CPS commenced. Finally, RSA holders under 50, who lose their jobs and cannot secure another employment within four months, can access 25 per cent of their RSA balance,” she submitted.

  • CPS: How PenCom is growing pension assets

    CPS: How PenCom is growing pension assets

    Though it was initially greeted with skepticism, the Contributory Pension Scheme (CPS) has defied the odds, demonstrating stability and growth of funds, the Director-General(DG), National Pension Commission (PenCom), Mrs Aisha Dahir-Umar, has said.

    The DG made this known in a statement obtained by The Nation.

    According to her, the efficacy of the safeguards embedded in the CPS are evident in the accumulation of pension fund assets, which reached N18.36 trillion as of December 31, 2023, an impressive increase from the N2 trillion deficit witnessed prior to the scheme’s introduction.

    Moreover, she said, the CPS has registered over 10 million Retirement Savings Account (RSA) holders since its inception.

    She stated that before the introduction of the CPS, the landscape of pension administration was riddled with challenges.

    She expalined that these challenges, ranging from lack of accountability and transparency to weak administrative structures, plagued the system.

    However, two decades since the inception of the CPS, the scheme has shown resilience, when compared to the shortcomings of the old Defined Benefits Scheme (DBS), she noted.

    On the safeguards, Mrs. Dahir-Umar stressed that ring-fencing of assets through the separation of custody and management; daily monitoring of fund investments; segregation of funds from the assets of pension operators; prohibition of applying pension funds as loans or as collateral for loans; strict licensing requirements; and effectiveness of the CPS safeguards have been critical to the growth and security of the funds.

    Ring-fencing of pension assets through the separation of custody and management functions

    She said: “The Pension Fund Administrator (PFA) manages the pension funds without having direct access to the funds, as custody is vested in a separate entity, the Pension Fund Custodian (PFC). In effect, while the PFA makes day-to-day investment decisions, in line with the Investment Regulations issued by the National Pension Commission (PenCom), it is the responsibility of the PFC to effect payments for the investment and receive any dividends or profits therefrom, on behalf of the PFA, while PenCom ensures that both parties adhere to regulations governing the pension funds.

    “Indeed, the cardinal principle of separation of custody from management and supervision has resulted in a pension scheme with a sound internal mechanism for transparency and accountability. The ring-fencing of pension fund assets and regulatory non-interference has resulted in the consistent growth in a large pool of pension assets.”

    Daily monitoring of pension fund investments

    “PenCom requires PFAs to submit daily valuation reports on the pension fund investments.These reports provide the details and value of investments made with the pension funds as at the end of each day. The implication is that PenCom is able to ensure that investments are in accordance with the Investment Regulations and could identify any infractions for corrective action. In effect therefore, the safety of the pension funds is monitored by PenCom at all times.”

    Segregation of pension funds from the assets of operators

    “There is a complete separation between the pension funds and the assets of pension operators. This means that an operator is not allowed to combine its company funds with the pension funds, which are held in exclusive accounts, kept in safe custody by the PFC. In effect therefore, a pension operator’s insolvency will not impact negatively on the pension funds. Indeed, where an operator is incapacitated by capital inadequacy for instance, the pension funds will simply be transferred to another solvent operator, under the direction of PenCom. This segregation of pension funds has further assured the transparency of the CPS.”

    Strict regulation on investment of pension funds

    “The investment of pension funds by PFAs are strictly regulated by the Investment Regulation, issued by PenCom. The regulation prescribes allowable investment outlets and sets upper limits in percentage of funds that can be invested. This ensures that risks are properly managed to ensure safety of the funds. The PFA’s exclusive responsibility for investment decisions is only limited by compliance to the provisions of the Regulation.”

    Prohibition of applying pension funds as loans or as collateral for loans

    “The pension funds are secured for the purpose of providing retirement and terminal benefits for the RSA holders. Consequently, pension funds are prohibited from being given out as loans or applied as collateral for loans. This has prevented the depletion of pension funds through non-performing loans taken by the RSA holder or the PFA granting a direct loan to a third party.”

    Read Also: House invites CBN Gov over REMITA leakages

    Strict licensing requirements

    “The Pension Reform Act 2014 (PRA 2014) prescribes a strict licensing regime to operate as a PFA or PFC.This includes possessing the professional capacity to manage pension funds, an undertaking not to engage in any other business except that of management of pension funds. In addition, such applicants must satisfy that they have never managed or administered any fund that has been in distress prior to the application.”

    Effectiveness of CPS Safeguards

    “The CPS safeguards have proven highly effective in ensuring the security of pension funds in Nigeria. These safeguards have significantly enhanced transparency, accountability, and overall efficiency within the CPS. Key indicators such as the substantial increase in pension fund assets and CPS membership attest to the success of these measures. However, these safeguards have been largely effective due to the strong regulatory and supervisory oversight by PenCom,” she added.

    She said the transition from the DBS to the CPS represents a significant evolution in pension administration.

    “The CPS, characterised by robust safeguards and careful management, has effectively tackled longstanding issues of accountability, transparency, and administrative weaknesses.

    “These safeguards, including asset ring-fencing, regular investment monitoring, stringent fund management regulations, and prohibition of misuse, have not only protected retirees’ interests but also bolstered confidence among stakeholders. Overall, the CPS has ushered in a period of resilience and progress, ensuring the growth and stability of pension funds while fostering trust in the system,” she added.

  • Reps to PenCom: probe retirees’ rip off complaints

    Reps to PenCom: probe retirees’ rip off complaints

    The House of Representatives has directed the National Pension Commission (PenCom) to investigate complaints of former employees who have been negatively impacted by the administration of contributory pension scheme (CPS) in the country.

    Adopting a motion sponsored by Clement Jimbo at plenary yesterday, the House also asked the Commission to ensure strict enforcement of the law and design a framework to guide against infractions of the Pension Act, 2014 in furtherance of the anti-corruption stance of the present government.

    The House also asked its Committee on Pensions to invite the National Pension Commission and Chief Executives of the PFAs to brief it on the activities of the Pension Fund Administrators (PFAs) as it concerns the investment of the Retirement Savings Account, benefits accruing to the employees upon retirement and the investment portfolio of the Retirement Savings Funds.

    Jimbo recalled that the Pension Reform Act, 2014, was enacted to govern and regulate the administration of the uniform contributory pension scheme for both the public and private sectors in Nigeria.

    According to him, the objectives of the Pension Act, as spelt out in the Act, are to establish a uniform set of rules, regulations, and standards for the administration and payment of retirement benefits for the Public Service of the Federation, the Public Service of the Federal Capital Territory, the public service of the state governments, the public service of the Local Government Councils, and the private sector.

    He also said the Act was established to ensure that every person who worked in the public service and the private sector receives his or her retirement benefits as at when due, as well as assist improvident individuals to cater for their livelihood in old age.

    He said most government retirees have complained of rip-offs under the guise of managing their benefits and entitlements under the Contributory Pension Fund Scheme operated by the PFAs.

    Read Also: PenCom recovers N25.4b from defaulting employers

    According to him, the retiree’s complaint that the CPS denies them of having a greater share of the lump sum after retirement, 25per cent of the total amount credited to their RSAs is usually dispensed across board under the scheme, while the balance of 75per cent is retained by the PFA for investment in the capital market with high returns, which is never added to the retirees’ monthly payments.

    He said with the rising value of the dollar against the naira, removal of fuel subsidies and increase in the price of goods and services, such paltry monthly payments, which remain the same for years, cannot sustain the retirees who had served the country meritoriously for 35 years.

    He expressed concern that PFAs’ 75 per cent RSA investments have not yielded adequate returns to Nigerian workers post retirement due to inflation and naira dwindling fortunes, causing further economic impoverishment.

    He said an investment of N5 million in Treasury Bills at the current rate of 13.9per cent per annum should have yielded a return on investment to a retiree of N695,000.00, and when divided by the monthly payment, a retiree gets N57,900.00, but instead N26,000.00 is paid resulting in an assumed shortfall of N31,900.00 because retirees have no option to invest.

  • PenCom recovers N25.4b from defaulting employers

    PenCom recovers N25.4b from defaulting employers

    The National Pension Commission (PenCom) has recovered a total of N25.4 billion from employers who failed to remit pension contributions for their employees.

    Director-General, National Pension Commission (PenCom), Mrs Aisha Dahir-Umar, made this known during the  Congress of the Finance Correspondents Association of Nigeria (FICAN) in Abuja.

    Dahir-Umar explained that since the inception of the recovery agent programmes in 2012 up until last December 31, the Commission had been able to recover this significant amount.

    However, she noted that this was only a fraction of what the commission could recover due to the large number of employers across the country and the limited number of recovery agents available.

    Of the N25.4 billion recovered, N12.9 billion was from principal contributions while N12.5 billion was from penalties imposed on defaulters.

    Dahir-Umar emphasised that the recovered funds had been paid into the Retirement Savings Accounts (RSAs) of the contributors.

    The Director-General warned employers against the consequences of not remitting pension contributions, stating that “it is more costly for them to fail in their obligations than to comply with the regulations. Late remittances attract penalties and interest charges, which are calculated at a rate of twoper cent per month”.

    Dahir-Umar stressed the importance of remittances by emphasising that the PenCom has recovery agents “deployed to organisations to review pension payment records and identify cases of non-remittance”.

    On the issue of uncredited remittances, she stated that if employers remitted contributions but failed to provide a company schedule showing which employees the funds belonged to, the Pension Funds Custodians (PFCs) could not allocate the funds to the respective RSA holders. PenCom has previously issued statements calling on individuals to rectify these uncredited remittances.

    Read Also: CPS provides gratuity payments, says PenCom

    On the investment of pension assets in infrastructure, Dahir-Umar assured that PenCom will not waver on its stringent guidelines.

    The commission, she said, “receives daily valuation reports, allowing us to closely monitor investment activities. If any deviations or non-compliance are detected, appropriate action will be taken promptly to rectify the issues”.

    She noted that PenCom does not participate in investment decisions concerning pension funds. “The Commission only sets general guidelines and regulations for investments. Pension Fund Administrators (PFAs) are responsible for evaluating investment opportunities and deciding whether or not to invest based on compliance with the guidelines”.

    Dahir-Umar clarified that the N18 trillion pension assets currently in existence belong to RSA holders and retirees. These funds are consistently invested, and the returns are automatically distributed back to the contributors, except for minimal charges for fund management and distribution.

    The Director General emphasized that there is no free money available from these assets. PenCom has a fiduciary responsibility to ensure the safety and effective management of these funds for the benefit of contributors and retirees. The Commission’s primary objective is to ensure that these funds are available to be paid as retirement benefits when due.

    With 10.1 million contributors, it is crucial to understand that every kobo within the N18.1 trillion pension assets belongs to RSA holders and retirees. The funds are managed diligently to fulfill the fiduciary responsibility of PenCom and the operators in the pension industry.

  • CPS provides gratuity payments, says PenCom

    CPS provides gratuity payments, says PenCom

    The National Pension Commission (PenCom) has cleared the misconception that the Contributory Pension Scheme (CPS) has abolished gratuity payments.

    Describing it as unfounded, the commission said the Scheme accommodates gratuity and enhanced retirement benefits through the Additional Benefits Schemes (ABS) for employers.

    While urging employers to embrace the ABS, PenCom said it has several benefits for employers and employees such as attracting and retaining talents, enhancement of employees’ morale and loyalty and improvement of an organisation’s reputation.

    The commission, in a statement, said with the Pension Reform Act (PRA) 2014 and the CPS, retirees and workers could navigate their retirement planning with greater clarity and confidence.

    The Director-General of PenCom, Mrs. Aisha Dahir-Umar, stated that  the CPS position on gratuity payments had been a subject of misunderstanding.

    She, however, said a closer examination of the Act alongside initiatives by PenCom shows a clearer picture that aims to fortify retirement benefits across the nation.

    Gratuity under the CPS

    Mrs. Dahir-Umar said: “With the introduction of the CPS as a reform to the old Defined Benefits Scheme (DBS), apprehensions arose regarding the fate of gratuity payments. Contrary to fears, the CPS framework, guided by the PRA 2014, has accommodated the payment of lump sums and other additional retirement and terminal benefits.

    “The PRA 2014 allows employers to establish Additional Benefits Schemes (ABS), through which they can provide enhanced retirement benefits, including gratuity payments, to their employees. This means that employers have the flexibility to offer additional severance benefits beyond the mandatory retirement benefits stipulated by the CPS, depending on the terms of employment, affordability and collective bargaining.

    “Under the CPS, an employee has the option to select from two modes of withdrawing retirement benefits, namely, programmed withdrawal from a Pension Fund Administrator (PFA) or retiree life annuity from a life assurance company. In both options, a lump sum payment is allowed to be accessed by the retiree.”

    Buttressing the commission’s commitment to the well-being of retirees, she said they allow the payment of a lumpsum at retirement as provided by the Regulations.

    “Similarly, gratuity under the DBS was also given as a lump sum payment to an employee upon retirement. One significant advantage of the CPS over the DBS is the security and transparency it offers regarding retirement benefits. Unlike in the DBS, where the promise of gratuity did not guarantee payment, the CPS ensures that funds are diligently managed by PFAs, making it impossible for employers to divert these funds for other purposes.

    “This safeguards retirees’ interests and provides them with greater assurance regarding the receipt of their terminal benefits. PenCom’s unveiling of the Framework for the Establishment of ABS under the CPS further solidifies this stance. This framework provides a structured approach for employers to enhance retirement benefits while ensuring the proper management and utilisation of pension funds.”

    Custody and Management of ABS

    She continued: “The PRA 2014 permits only institutions licensed by PenCom to hold and manage pension funds and assets. Consequently, only licensed PFAs can manage pension assets.

    Read Also: Food inflation: FG to form commodity board to fight price volatility

      “Similarly, the custody of pension assets can only be done by licensed Pension Fund Custodians (PFCs).

    “Employers seeking to establish an ABS for their employees must demonstrate compliance with the PRA 2014. This includes up-to-date pension contribution remittances, Group Life Insurance cover, and execution of a Portfolio Management Agreement (PMA) with a chosen PFA. Employers may appoint one or more PFAs to manage the ABS, with a lead PFA designated in cases of multiple appointments.

    Documentation requirements

    “Employers must submit various documents to PenCom for review and approval to establish an ABS. These include the draft Portfolio Management Agreement, Trust Deed, Rules of the Scheme, evidence of pension contribution remittance and Group Life Insurance policy, and evidence of employees’ Retirement Savings Accounts (RSAs).

    “They also need to provide information to indicate if the scheme is a Defined Benefit or Defined Contribution and give an undertaking to comply with regulatory provisions and to fund the scheme continuously. The appointed PFA is responsible for annual actuarial valuations and audits, ensuring compliance with regulatory guidelines.’’

    Impact of ABS

    “Stakeholders have adjudged the implementation of the CPS in Nigeria a success. However, there are some issues regarding low pensions, especially for public sector retirees. This could be attributed to several factors, including the relatively low pay when compared to the private sector and insufficient accumulation of funds for long periods under the CPS, among others.  It is vital to state that the CPS provides a comprehensive framework that allows employers and employees to plan and save towards retirement benefits.

    “Accordingly, employers can use the Framework for the Establishment of Additional Benefits Schemes recognised by the PRA 2014 to increase the pensions of their employees.

    “It is also imperative to state that various options are available to employers and employees to improve the adequacy of pensions for employees. Providing additional retirement benefits can have several benefits for employers and employees. It can attract and retain talent, enhance employee morale and loyalty and improve an organisation’s reputation,” she added

  • No access to RSAs without data recapture, says PenCom

    No access to RSAs without data recapture, says PenCom

    The National Pension Commission (PenCom) has directed Retirement Savings Account (RSA) holders enrolled in the Contributory Pension Scheme (CPS) to participate in the ongoing Data Recapture Exercise (DRE) on or before July 1 or face the consequencies.

    PenCom Director-General, Mrs. Aisha Dahir-Umar in a statement, said the exercise, which is conducted by Pension Fund Administrators (PFAs), aligns with the industry’s commitment to enhancing the database of registered pension contributors and retirees.

    Last year, she said a total of 218,953 RSA holders were recaptured by the PFAs, noting that the exercise is important for maintaining up-to-date, comprehensive, and accurate data of RSA holders.

    She, however, said there were still many eligible RSA holders who are yet to be recaptured and are required to undergo the exercise.

    She noted that employees who opened RSAs from July 1, 2019 onwards were not required to be recaptured.

    Necessity of data recapture

    Explaining that the data recapture was introduced in July 2019, she said the Enhanced Contributor Registration System (ECRS) replaced the old Contributor Registration System (CRS), providing a seamless integration with the National Identity Management Commission’s (NIMC) database.

    She said: “It enables the verification of the uniqueness of individuals registered by PFAs under the CPS. A major challenge hitherto experienced with the CRS was that at the commencement of the CPS, biometrics of contributors was not captured during RSA registrations due to technological limitations. This challenge has been surmounted with the deployment of the ECRS, which is an in-house computer application developed exclusively by PenCom.’’

    Who should participate?

    According to her, participation in the recapture is mandatory for active employees and retirees, who opened their RSAs on or before July 1, 2019. Furthermore, RSA holders with multiple Personal Identification Numbers (PINs) must present their PINs during the process.

    Changes in name due to marriage, employer changes, or Next-of-Kin (NoK) alterations require completion of the data recapture process. It is crucial to note that failure to participate in the DRE affects RSA holders’ ability to update registration records in the future.”

    Implications for non-participation

    “Not participating in the DRE carries significant implications for accessing pension services from PFAs. For instance, only RSA holders who have completed their data recapture can transfer their RSAs from one Pension Fund Administrator (PFA) to another. Additionally, contributors who have not been recaptured will not be able to access retirement benefits upon retirement.  “Furthermore, access to 25 per cent of the RSA balance in cases of temporary job loss and access to RSA balance towards payment of equity contribution for residential mortgage are exclusively available to RSA holders who have completed the data recapture.

    Read Also: NGX, PenCom unveil Pension Broad Index to transform investments

    “RSA holders with multiple PINs who fail to recapture their data will experience delays in resolving their situations, potentially resulting in incorrect remittances by employers. This could also result in delayed payment of retirement benefits. Hence, it is in the best interest of RSA holders to participate in the recapture to ensure seamless access to services from PFAs”.

    Requirements for data recapture

    The DG further stated that an RSA holder must possess a NIN to be recaptured, in line with the Federal Government’s National Identity Policy. She said: “Active contributors must visit their PFAs and provide their Staff Identity Card or any valid means of identification, such as a National Driver’s License, Permanent Voter’s Card, or International Passport.   “Additionally, they should present their Enrolment Slip issued by NIMC and Birth Certificate or Sworn Affidavit of Age Declaration for the recapture. “Retirees under programmed withdrawal or annuity should provide any valid means of identification, the Enrolment Slip issued by NIMC, and the Letter of Retirement issued by their employer for the recapture.

    “For RSA holders who have changed their surnames or first names, or both, after registration, the following documents must be presented to their PFA for recapture: Marriage Certificate (if applicable), Newspaper publication for the change of name, and Sworn Affidavit and Confirmation Letter for change of name from the employer (if still employed). PFAs will issue acknowledgment slips to RSA holders upon submission of complete documentation, and notification of the status of their recapture will be sent via text messages within five working days.’’   Mrs. Dahir-Umar called on eligible RSA holders to approach their PFAs with their NINs, as well as other mandatory biodata information to enable their recapturing. PenCom remains committed to regulating and supervising the pension industry to ensure timely payment of retirement benefits, she added.

  • NGX, PenCom unveil Pension Broad Index to transform investments

    NGX, PenCom unveil Pension Broad Index to transform investments

    The Nigerian Exchange Limited (NGX), in collaboration with the National Pension Commission (PenCom), has introduced the NGX Pension Broad Index (NGXPENBRD) to transform the equities investment landscape for pension funds.

    The new index also addresses the limitations of benchmarks, providing a more inclusive and representative measure of the investment of pension funds.

    The Director-General, PenCom, Mrs. Aisha Dahir-Umar, said the NGX Pension Broad Index is expected to play a pivotal role in guiding investment decisions for Pension Fund Administrators (PFAs).

    She stated that its composition and adherence to regulatory criteria contribute to enhancing the stability of the industry.

    Evolving from Constraints

    The PenCom boss said pension funds rely on the NGX All Share Index (ASI) and NGX Pension Index (PI) for assessing the performance of their equities.

    However, she noted that both indices had their limitations, explaining that the ASI encompassed  stocks listed on the Nigerian Stock Exchange, including those ineligible for pension fund investments.

    On the other hand, she said the PI comprised only 40 stocks, leading to a narrow representation dominated by high-value stocks.

    Recognising these constraints, PenCom and NGX sought to develop a more comprehensive benchmark, she added.

    Why we introduced NGX Pension Broad Index

    She stated that the NGXPENBRD was introduced to address the shortcomings of the ASI and PI by expanding the eligible stocks and incorporating criteria in line with the regulation.

    “To qualify for inclusion in the NGX Pension Broad Index, companies are required to satisfy specific eligibility criteria. This includes demonstrating a consistent track record of taxable profits over a minimum of three out of the last five years prior to the investment consideration. Moreover, companies seeking inclusion must exhibit a history of either distributing dividends or issuing bonuses in at least one of the preceding five years.

    “Furthermore, adherence to the NGX’s free float rules is essential. To meet this criterion, companies must maintain a Free Float Factor of no less than five per cent. This ensures that a significant portion of their shares is actively traded in the market, aligning with the Exchange’s commitment to maintaining a robust and representative index. It also aids the pension funds liquidity requirement through easy entry and exit of investments,” the DG said.

    Key features of the NGX Pension Broad Index

    Mrs Dahir-Umar continued: “Expanded Composition is a major feature of the new index the NGX Pension Broad Index. It includes 84 stocks, up from the 40 in the previous NGX Pension Index. This expansion resulted from a meticulous selection process, ensuring adherence to profitability and dividend payment criteria set by the regulatory framework.

    Read Also: Shake up in police Intelligence Operations

    “Regular rebalancing is a significant feature of the NGX Pension Broad Index. To maintain integrity, the index undergoes semi-annual rebalancing, adjusting sector weights to reflect market dynamics accurately. In addition, the NGX Pension Broad Index has introduced diversification. The broader universe of the NGX Pension Broad Index provides a more diversified representation, catering to Pension Fund Administrators (PFAs) with investments beyond the confines of the NGX Pension Index.”

    Promising performance and regulatory approval

     Since its launch, Mrs. Dahir-Umar said, the Index has demonstrated robust performance.

    Comprising high-quality stocks across key sectors such as banking, insurance, oil and gas, consumer goods, and industrial goods, the index aligns with the PenCom Regulation on the Investment of Pension Fund Assets.

    PenCom has endorsed the Index as the benchmark for the industry equity investment portfolios. This  approval solidifies the index’s credibility as a reliable yardstick for evaluating equity performance within the industry, she stressed.

    Guiding investment decisions and ensuring stability

    Mrs. Dahir-Umar also said the NGX Pension Broad Index is expected to play a pivotal role in guiding investment decisions for PFAs, offering a comprehensive view of the market. Its well-diversified composition and adherence to regulatory criteria contribute to enhancing the stability of the industry.

    She added that the NGX Pension Broad Index marks a significant leap  in the evolution of benchmarks for pension fund investments, ensuring a more inclusive, representative, and stable investment landscape.