SECTION 36(1) of the Pension Reform Act (PRA) 2014 mandates the National Pension Commission (PenCom) to submit annual reports to the President and the Public Account Committee of the National Assembly. Apart from the mandatory Annual Report, PenCom also publishes quarterly and monthly reports of its activities and other relevant information on the pension industry on its website.
The core information for this article is obtained from the Commission’s third quarter report posted on its website. I decided to highlight these critical information essentially as part of this column’s aim of providing useful information to, and continuous enlightenment, of workers, employers, pension desk officers, trade union leaders and the general public.
Surveillance of the industry
PenCom carries out on-site and off-site surveillance of Pension Fund Operators, with the on-site aspect on suspension since 2020 due to the Covid-19 pandemic. However, an enhanced off-site surveillance of the operators continued through the review of the monthly reports submitted by the operators.
The review of operators’ activities during the third quarter of 2020 indicates substantial compliance with the extant laws and regulations issued by PenCom. The key areas of regulatory concerns include the rise in unfunded Retirement Savings Accounts (RSAs). As a result, the Pension Fund Administrators (PFAs) were directed to ensure that all remitted contributions are credited into the RSAs of beneficiaries and also liaise with the respective employers to ensure up-to-date funding of the contributors’ RSAs.
Update on periodic RMAS reports
All licensed pension operators, comprising of twenty-two PFAs, four PFCs and six (6) CPFAs, rendered returns on Assets under Management (AuM) and Company Accounts via the RMAS platform during the quarter.
Annual General Meetings
One PFA held a virtual Extraordinary General Meeting during the period under review. The key highlights of the meeting include the change of external auditors and appointment of new ones, pursuant to Section 409 of the Companies and Allied Matters Act (CAMA) 2020.
Un-credited contribution rising
A review of the compliance reports forwarded by the pension operators during the quarter under review revealed a significant rise in the number of RSAs with un-credited pension contributions. The PFAs attributed the backlog of un-reconciled contributions to their skeletal workforce for processing the contributions, in compliance with the Covid-19 induced stay-at-home order. They were nonetheless, directed by PenCom to ensure all pension contributions received during the lockdown were duly reconciled and credited to the respective RSAs of the contributors.
Other notable observations from the compliance report were that all outstanding payments of retirement benefits approved by PenCom have been credited into the respective RSAs of the beneficiaries by the PFAs. The operators also met all the outstanding commitments due from previous routine examinations within the quarter.
Approval of appointments
In line with the provisions of Section 79(1) of the PRA, PenCom, in the period under review, granted approval to three (3) pension fund operators, namely Nestle Nigeria Trust (CPFA) Limited; UBA Pension Custodian Limited; and Premium Pension Limited for the appointments to Board/Executive Management positions.
Approval of Additional Benefit Schemes
PenCom granted approval to five (5) private sector organisations and one public agency to establish Additional Benefits Schemes for their employees in line with the provisions of Section 4(4)(a) of the PRA, 2014. Section 4 has to do with rates of contribution to the scheme, while subsection 4(a) provides that “Notwithstanding any of the provisions of this Act, an employer may agree on the payment of additional benefits to the employee on retirement”.
Other regulatory and supervisory activities
i. PenCom issued a revised circular on the requirements for granting PFA and PFC licenses to reflect the provisions of the PRA 2014 and industry developments.
ii. It issued a framework for virtual meetings by licensed pension operators, setting out the minimum standards and regulatory requirements for virtual meetings in the era of the Covid-19 pandemic.
iii. The Commission equally granted a “no-objection” for Eustacia Ltd, an SPV incorporated in Nigeria and wholly owned by Verod Capital Management Fund, to acquire 100% shareholding in AXA Mansard Pension Ltd. The acquisition processes had since been concluded.
iv. PenCom also approved the 2019 audited financial statements of the Company and funds under the management of five (5) operators namely; Stanbic IBTC Pension Managers Ltd; IEI-Anchor Pension Managers Ltd; Premium Pension Ltd; FCMB Pensions Ltd; and Nestle Nigeria Trust Ltd.
Issuance of Pension Clearance Certificates
During the quarter under review, 5,700 private sector organisations applied for issuance of Pension Clearance Certificates (PCCs). Out of this number, 5,432 organisations were issued certificates while the remaining 268 applications were declined for not meeting the stipulated requirements. A total sum of N24,979,121,189.77 was remitted into the RSAs of 76,498 employees by the 5,432 organisations that were issued with the PCCs.
Recovery of outstanding contributions and penalty from defaulting employers
Following the issuance of demand notices to defaulting employers whose pension liabilities had been established by the Recovery Agents (RAs), a sum of N213,071,826.04, (representing principal contributions of N156,533,438.35 and penalty of N56,538,387.69), was recovered from 13 defaulting employers.
Refund of contributions to military personnel, security agencies
PenCom received and processed 81 applications for the refund of pension contributions totalling N6,136,638.57 to military and other security agencies’ personnel who were exempted from the Contributory Pension Scheme (CPS) during the quarter.
Transfer of NSITF contributions RSAs
During the quarter under review, PenCom received 14 batches of NSITF transfer applications on behalf of 220 NSITF contributors. Accordingly, approval was granted for transfer of the sum of N13,699,738.72 to the RSAs of the 220 contributors.
Implementation update on states
The status of implementation of the CPS in the states of the federation remained relatively the same between Q2, 2020 and Q3, 2020. However, a few states witnessed changes in some implementation milestones. Overall, twenty-five states of the federation had enacted pension laws on the CPS while seven states were still at the bill stage. Five states were operating other pension schemes with four of the states adopting the Contributory Defined Benefits Scheme (CDBS) while one state operated the Defined Benefits Scheme (DBS).
Registration, contributions on Micro Pension Plan
During the quarter under review, nineteen PFAs registered 6,826 contributors under the Micro Pension Plan (MPP). The participants contributed a total of N22,531,779.94 into their respective RSAs. Cumulatively, a total of 58,800 informal sector workers had registered under the MPP and contributed a total sum of N64,662,323.38 from inception in March 2019 to 30th September 2020.
Withdrawals and Conversions
PenCom granted approval to four PFAs to pay the sum of N208,000.00 to four MPP participants as contingent withdrawals in line with the guidelines. A total of fourteen MPP participants converted from MPP to the mandatory CPS following their employment in the formal sector of the economy.
Membership by PFAs (RSA Registrations)
During the quarter under review, twenty-two (22) PFAs registered 107,158 new RSAs. This brought the total RSA registration count to 9,147,039 as at 30th September 2020.
Employer Code Generation
During the quarter under review, PenCom generated 2,781 employer codes for private sector organisations, accounting for 98%, while employer codes generated for non-governmental organisations, unions/associations and MDAs under the federal and state governments numbered 48 or 2% of the total.
The RSA Transfer System (RTS)
PenCom conducted technical and operational workshops on the RTS as well as industry simulation of the RSA Transfer processes with the PFAs in preparation for deployment of the RTS in the last quarter of the year. The draft regulations for the transfer of retirement savings accounts were also concluded and exposed to the stakeholders for their inputs.
Scheme Memberships Statistics
The pension industry recorded a 1.18% growth (107,158) in the scheme membership during the third quarter of 2020, moving from 9.10 million contributors at the end of the preceding quarter to 9.20 million at the end of the third quarter of 2020. The growth in the industry membership was driven by the RSA Scheme, which had an increase of 107,312. However, membership of the Closed Pension Fund Administrator (CPFA) scheme declined by 154 members to 16,971 while the Approved Existing Scheme (AES) membership remained unchanged at 40,951 as at the end of the third quarter of 2020.
Programmed Withdrawal (PW)
During the quarter under review, the sum of N35.71 billion was approved for payment as lump sum and N497.98 million as monthly programmed withdrawals to 12,195 retirees. A sectorial breakdown showed that 64.71% of those that received pension under the PW were from the public sector while retirees from the private sector accounted for the remaining 35.29%.
Retirement by annuity
PenCom approved a total of 3,215 applications for retirement under life annuity during the third quarter of 2020. These retirees received N8.75 billion as lump sum and paid premium of N20.79 billion to insurance companies in exchange for monthly annuity of N188.07 million.
Withdrawal of 25% RSA balance
During third quarter of 2020, PenCom granted approval for the payment of N8.10 billion to 13,569 RSA holders who were under the age of 50 years and were disengaged from work but unable to secure jobs within 4 months of disengagement.
Approval of death benefits
The Commission approved the payment of N8.56 billion as death benefits to the beneficiaries of 1,821 deceased employees during the 3rd quarter of 2020.
The Commission granted approval for the payment of the entire RSA balances of the categories of retirees whose RSA balances were N550,000 or below and considered insufficient to procure programmed withdrawal or annuity of a reasonable amount over an expected life span. Approval was also granted for the payment of RSA balances to foreign nationals who decided to return to their home countries after making contributions under the CPS. Accordingly, the sum of N820.54 million was paid to 3,207 retirees, which comprised 193 from the public sector (federal and states) and 3,014 from the private sector during the quarter.
During the quarter under review, the Commission granted approval for withdrawal of the sum of N2.18 billion from the voluntary contribution accounts of 1,286 contributors.