On November 16 last year, the National Pension Commission commenced the implementation of the Retirement Savings Account transfer window under the Contributory Pension Scheme.
The transfer process will allow RSA Holders to transfer their accounts from one Pension Fund Administrator to another within a year, in line with Section 13 of the Pension Reform Act of 2014.
The commission had said the launch would signify the official opening of RSA transfer window. Prior to the launch, PenCom had successfully developed the RSA application, which is an electronic platform to enable seamless account transfer.
Advertisement
The implication of the transfer window option is that retirement account holders can port from one PFA to the other even if he or she does not give any reason for the action.
Experts are of the view that the development will translate into increased competition in the PFA space as account holders will move to operators that give them the best returns on investment.
The commission, however, said it has also conducted extensive workshops for licensed pension operators and state pension bureaus in readiness for the effective implementation of the window.
“The activation of the RSA transfer process will engender competition and improve service delivery in the pension industry while asserting the right of RSA holders to determine which PFA manages their pension contributions and retirement benefits,” PenCom said.
The Commission had initially projected June last year as the commencement date for the RSA transfer window, but had failed to launch the process owing to issues bordering on registration and biometrics.
The commission said it needed to resolve concerns over double registrations by some contributors and improper identification, which may lead to wrongful transfers among account holders.
But for the initial delay, the transfer window was designed to come into force together with the Pension Reform Act 2014, which gave birth to the CPS.
Stakeholders also believed that providing contributors with a transfer option will boost their confidence in the scheme.
According to Section 11(2) of the Pension Reform Act 2004, an employee reserves the right to migrate from one PFA to another without adducing reasons, but may not do this more than once in a year.
The development will put some of the leading PFAs, including ARM Pensions, Stanbic IBTC Pensions, Premium Pension Limited and Sigma Pensions Limited under pressure to make adjustments or lose their clients to competition.
Records show that these PFAs currently hold about half of the N11trn RSA assets. Among the 21 licensed operators, the top 10 PFAs managed about 88.20 per cent of the total RSA assets.
For 17 years, employees and retirees under the scheme were restricted to one PFA of choice to manage their RSA. Part of the law that allows changes of PFA was only recently implemented by the regulatory authority, the PenCom.
Before now, many were subjected to poor service as a result of low branch network that makes it difficult for contributors to reach PFAs, delay in pension payment, non-provision of monthly, quarterly or yearly statements while they engage in other issues not consistent with code of corporate governance and global practice.
Section 13 of the Pension Reform Act (PRA) 2014 specifies that a RSA Holder may transfer his account from one PFA to another. It, however, specifies that such a transfer should not be done more than once yearly.
According to the PenCom guidelines on RSA transfers, the period for transfers shall be carried out quarterly. This includes January 1 to March 31 for the First Transfer Quarter; April 1 to June 30 for the Second; July 1 to September 30 for the Third Quarter; and October 1 to December 31 for the Fourth.
According to the Commission, there are five major steps that must be fulfilled by any RSA holder to transfer his or her account. The steps are data recapture with current PFA, submission of RSA transfer request to receiving PFA, validation of identity with receiving PFA, transfer of RSA and funds to receiving PFA by current and notification to RSA holder of successful transfer.
Explaining further, PenCom stated that in the area of data capture, “You must ensure that your personal details have been recaptured and updated on the ECRS by the PFA that currently manages your RSA. This applies if you opened your RSA before July 1 2019 and your personal details have not been recaptured.”
The second step to transferring your RSA is the submission of RSA transfer request to the receiving PFA. In order to achieve this, PenCom advised the RSA holder to approach the PFA he or she is intending to move to and submit the transfer requests. The RSA Holder must also provide his or her surname, RSA PIN, email and current phone number.
After the submission of RSA transfer request, the next step according to the Commission is validation of identity with the receiving PFA. Under this step, the RSA Holder intending to transfer would be required to provide fingerprint for the authentication of identity on the National Identity Management Commission’s database. Thereafter, the receiving PFA will be issued a printed confirmation slip, which should be signed by the RSA Holder as proof that his or her transfer has been submitted.
The next stage after this is the transfer of RSA and funds to the receiving PFA by the current PFA.
According to the Commission, “Your current PFA will transfer all the funds in your RSA to your new PFA at the end of the applicable quarter. The process is closely monitored by PenCom.”
The final stage in the transfer process is the notification of the RSA Holder of successful transfer. Under this process, the RSA Holder that is seeking to transfer would be notified by PenCom and the receiving PFA when the RSA has been transferred.
The immediate implications of the transfer window, according to experts, is that PFAs that have not been offering good customer service and portfolio returns to their customers may see large fund outflows to other PFAs.
The service delivery of operators will certainly need to improve drastically in other to compete, which bodes well for the customers.
The PFAs will also need to improve on investment management by providing competitive returns for customers in order to attract more funds.
This will further encourage competition among firms and put them on their toes to deliver superior service. PenCom has also ensured that the process is seamless and inexpensive on the part of PFA clients.