Contributors to the new pension scheme cannot change their Pension Fund Administrators once they open a Retirement Savings Account because the window of transfer, which should allow such under the 2004 Pension Reform Act, has not been opened. NIKE POPOOLA reports that the National Pension Commission may soon issue a regulation to allow changing of PFAs

Over the years, the Pension Fund Administrators have been operating their business in a monopolistic manner, which has allowed them to continue to dictate to contributors in the Contributory Pension Scheme, the value that they get for  services rendered.

The implication of this is that once a worker opens a Retirement Savings Account with a PFA, he has no opportunity of changing his PFA  whether or not  he is pleased with its services or not.

However, this is against the provisions of the pension law.  In fact, the Act provides a competitive system whereby, a worker who has been contributing in a PFA and is not pleased with it can change to another PFA, at least once in a year.

According to the law, where an employee transfers his service or employment from one employer or organisation to another, the same RSA will continue to be maintained by the employee.

It is worthy of note that, Section 11 (2) states that the employee may, not more than once in a year, transfer the RSA from one PFA to another without adducing any reason for such a transfer.

While many contributors have not had reasons to complain about services of their PFAs, those who have had complaints have always continued with their PFAs as they have no option.

It is expected that when a PFA is able to satisfy his contributor, the contributor may decide to continue with it after retirement. On the other hand, if the contributor is not pleased, he may as well change his PFA before he reaches retirement, and therefore use another pension administrator for the management of his retirement fund.

Stakeholders have continued to wait for the National Pension Commission, the regulator, to open this window, in order to give the contributors options to chose from, and keep the PFAs on their toes to treat their customers as kings.

The Director-General, Lagos State Pension Commission, Mr. Adekunle Hussain, said that for now, a contributor was not allowed to change his PFA for whatever reason because the window of transfer had not been opened.

Even when the worker changes job, he added, he would  have to continue to use the PFA that he was using with his former employer.

He said, “It is not allowed to change a PFA, what is required by law is that when a worker is changing job, the same RSA that he was using with his former employer should be used when he moves to another employer.”

According to him, all the worker needs to do is to supply his new employer with the name of his PFA along with his PEN  number.

He said, “The only instance where you can move to another PFA is if the transfer window is opened and you decide to change your PFA.”

Because this window has not been opened, he said that a worker  must retain his account with the PFA that he had chosen.

According to him, the law on window of transfer allows a contributor to change his PFA but adds that the law does not allow him to have two PFAs at a time.

“The law allows you to change your PFA once every year but the transfer window is not open yet by PenCom. But hopefully, it will be done before the end of the year and workers can then move from one PFA to the other,” Hussain said.

The Director-General, PenCom, Mr. Muhammad Ahmad, said the commission was doing everything possible to ensure the  smooth transfer of RSAs by contributors seeking to change their PFAs.

Ahmad said, “There are administrative, data, IT and consultative issues that must be cleared before an alternative window is opened.”

Once the necessary machinery for the transfer is put in place, he explained that the regulations, which would  enable the fund managers to effect the transfers, would be issued.

The PenCom boss added that this was a major area which the commission was working towards, to ensure that it was completed before the end of the year.

Ahmad explained the duties of the PFA to the contributors as well as their boundaries concerning the contributions of the workers.

He said that the PFAs owed the contributors the duty to send statement of accounts to them regularly, and listen to their complaints.

The director-general also said the PFAs owed the newly-retired contributors the duty to explain to them, the retirement options available to them, without coercing them on retirement options.

He said, “It is not right for a PFA to decide for the retiree how it will be paying him when he retires. It can only advise the retiree on the options available to him in the  payment of his benefits.”

Ahmad therefore encouraged contributors to report defaulting PFAs to  the commission for necessary actions.

According to him, the PFAs do not collect money (contributions) from the employer for remittance to Pension Fund Custodians, who hold the money.

Rather, he explained that, it is the employer that deducts contributions for remittance to PFCs.

Ahmad said, “PFAs only give directive to PFCs on where and how the contributions should be invested according to the commission’s investment guidelines.”

The regulator said that each transaction of PFAs with PFCs is known to PenCom because the commission gets daily returns of transactions between the two entities.

He added that the way investment of pension funds worked was that there were allowable transactions.

Ahmad said the PFAs  would instruct the PFCs to invest in such allowable transactions at allowable percentages.

For this reason, he explained that it was not possible for PFAs to withdraw money from PFCs for investment at will.

“PFCs are statutorily required to ensure compliance with 2004 PRA and regulations,” he added.

Source: Punch