By 
The National Pension Commission (PenCom) has attributed the successes of the Contributory Pension Scheme (CPS) to its robust structural framework. A significant aspect of the 2004 pension reform was the licensing of Pension Fund Administrators (PFAs), which are private companies tasked with managing and administering the retirement savings of employees and retirees.
To grasp the roles and responsibilities of PFAs, it’s essential to understand the operational framework of the CPS, which encompasses several key functions.
Registration of Contributors
PenCom explained that PFAs are responsible for establishing Retirement Savings Accounts (RSAs) for employees. This process includes issuing a Personal Identification Number (PIN) once the employee completes the registration forms and submits the necessary documentation. It is important to note that employees have the exclusive right to select their PFA.
Crediting Individual RSAs
PFAs are tasked with crediting RSAs with monthly pension contributions, which are deducted by the employer and forwarded to the Pension Fund Custodian (PFC). This transfer is accompanied by a schedule that lists the employees’ names, RSA PINs, contribution amounts, and the period of remittance. Upon receipt of the schedules, the PFC informs the PFA.
Investment Decisions
The pension contributions within individual RSAs are pooled by PFAs into various investment funds. As fiduciaries, PFAs have the responsibility to make investment decisions that prioritize the safety of funds and fair returns for contributors. All investment activities must adhere to the Investment Regulations set by PenCom, and any income generated is solely for the benefit of the contributors.
Payment of Retirement Benefits
The CPS’s primary goal is to ensure timely payment of retirement benefits. PFAs are responsible for processing these benefits for retirees, which involves verifying that all required documentation is submitted at least six months before retirement. They must also obtain necessary approvals from PenCom and issue payment instructions to the PFC.
Customer Support for RSA Holders
PFAs provide essential customer support to RSA holders, including quarterly statements of their RSAs. PenCom mandates that PFAs maintain an adequate number of branches to serve areas with a significant number of registered RSAs and ensures that the necessary technology is in place for easy access to services.
Reporting to PenCom
PFAs are required to maintain comprehensive financial records and submit off-site returns to PenCom. These returns enable effective oversight and include valuation reports on investments and monthly and quarterly updates on PFA operations. Additionally, PenCom conducts routine annual examinations and special assessments as needed.
Appointment of Pension Fund Custodians
The management of pension funds is a joint responsibility of the PFA and the PFC. Therefore, it falls to the PFA to appoint a licensed PFC to ensure the safekeeping and custody of the pension funds under its management.
Commitment to Service Excellence
PenCom is dedicated to ensuring excellence in service delivery to all stakeholders. This commitment has led to periodic increases in the Minimum Regulatory Capital requirements for PFAs. It is crucial for PFAs to prioritize high-quality service, given their critical functions.
PFAs must provide accessible channels for complaint resolution, allowing RSA holders to address issues directly with them before escalating to PenCom when necessary. Common concerns include non-remittance of pension contributions, retirement benefit payments, and overall administration. Currently, there are 18 PFAs managing pension fund assets on behalf of RSA holders, and PenCom remains committed to effectively regulating and supervising the pension industry to ensure timely payment of retirement benefits.
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