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PenCom to sanction PFAs over pension fund management

By BusinessNews Staff on May 3, 2014

The National Pension Commission is ready to sanction some Pension Fund Administrators for non-compliance with regulatory requirements on the management of the growing pension funds, investigation has revealed.

According to information obtained from the compliance report prepared by PenCom, some of the issues observed from the reports forwarded by the PFAs to the commission include non-compliance with investment limits; delay in the payment of retirement benefits; and receipt of pension contributions without appropriate schedules.

Others are unresolved customer complaints; failure to fill vacant management positions; and non-implementation of disaster recovery plans.

PenCom stated that it had forwarded letters to the concerned operators and was monitoring their efforts at resolving the issues.

As of February, the total pension asset under the Contributory Pension Scheme had exceeded N4tn, according to the commission.

The Pension Reform Act, 2004 empowers the PFAs to manage the funds, while the Pension Fund Custodians are empowered to keep the money in their custody.

The PFCs are mandated to take instructions from the PFAs on the investment of pension funds and must not contract out the custody of pension assets to third parties, except for allowable investments made outside Nigeria, according to the latest investment guidelines released for the industry by PenCom.

According to PenCom’s guideline, an evaluation of the risk management reports forwarded by the operators showed that some of them faced operational risks associated with receipt of contributions without appropriate schedules, litigations, concentration of portfolio investment, and non-funding of the Retirement Savings Accounts of the workers by employers.

The commission said that it had advised the concerned operators to strengthen their mitigating measures in order to avert the identified risks.

Pencom also stated that it had received and reviewed the actuarial valuation reports of 13 Defined Benefit Schemes.

The reports, it stated, showed that some of the schemes were under-funded.

Consequently, it directed the affected scheme sponsors to come up with funding arrangements that would clear the identified gaps.

The Acting Director-General, PenCom, Mrs. Chinelo Anohu-Amazu, said that the commission had remained steadfast in the implementation of the CPS and that in 10 years of its existence, some modest achievements had been made.

Foremost among such achievements, she said, was the consistent payment of retirement benefits to all employees who retired under the scheme since 2007 without the bottlenecks experienced in the past.

She observed that prior to the enactment of the PRA, 2004, pension administration in the country was bedevilled by many challenges.

The PenCom boss said that in the public sector, which operated the defined benefit Pay-As-You-Go scheme, some of the prominent challenges encountered included lack of transparent administration of pensions, which resulted in the accumulation of huge liabilities and inconsistent payment of stipends to retirees.

“The PRA 2004, which sought to address in a holistic manner, the perennial problems associated with pensions in both the public and private sectors, established the CPS and created PenCom to regulate, supervise and ensure the effective administration of pension matters in Nigeria,” she said.

[Punch]

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