Need to Unlock Pension Transfer Window

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Ebere Nwoji urges the National Pension Commission to commence the transfer window in the pension industry

The pension transfer window which is an avenue for contributors into the Contributory Pension Scheme (CPS) who are dissatisfied with the services of their present Pension Fund Administrators (PFA) to move to another operator, is one aspects of the pension Reform Act 2004 amended in 2014 that is yet to be implemented.

Despite agitations by the contributors, the industry regulator, the National Pension Commission has not succeeded in its efforts to commence the exercise.

Yet, in it lies the hope of every contributor into the scheme.
Both the National Pension Commission (PenCom) and the Pension Operators Association of Nigeria (PenOp) had assured contributors into the CPS that the long awaited transfer window would take-off by June this year, but till date, the initiative is yet to take off.

Section 13 of the Pension Reform Act (2014) specifies that an employee may not more than once in a year transfer his Retirement Savings Account (RSA) from one PFA to another.

Past administrations in PenCom had given several dates for the take-off of the initiative.

Managing Director, UBA Pension Custodian, Mr. Bayo Yusuf, disclosed that PenCom and the PFAs have been engaging on the matter.

The transfer window going by the Pension Reform Act 2014 that gave birth to the CPS, supposed to have commenced the same time with the scheme but the commission and the operators kept delaying it giving reasons with biometrics collation and clearance.

PenCom had said among the issues that have continued to delay the take-off of the policy is registration and biometrics. It had said it wants to address issues such as double registration by some contributors and improper identification which may lead to transferring one person’s fund to another, before it unveils the policy.

Stakeholders have also said if the micro-pension scheme which is expected to usher in additional 250,000 contributions into the scheme yearly comes into full force, it would be difficult for the transfer window to be a reality.

The contributors had expressed their preference that the transfer window had taken off before the commencement of the micro pension scheme which is expected to bring in additional 250,000 contributors into the CPS every year, to avoid much more complications in the system.

Section 11(2) of the Pension Reform Act 2004 (amended in 2014), provides that an employee has right to migrate from one PFA to another without adducing reasons, but may not do this more than once in a year.

PenCom Head of Corporate Communications, Mr. Peter Aghahowa, while speaking on the delayed take-off of the initiative said what the existing PFAs need to do is to diversify their clientele especially with the take-off of the micro pension.

“Those that have single based clientele will feel threatened but those that are diversified will have nothing to lose,” he said.
Mr Ifeanyi Anorue of the Department of Mass Communication, University of Nigeria Nsukka, noted that the agitation for the take-off of the transfer window and struggle for independent body to manage some workers’ pension separately as was the case with university workers’ pension was informed by the obvious lack of confidence in the existing PFAs.

He said this stems from the fact that the survival of every pensioner depends on what happens to his pension funds.

According to him, if other stakeholders such as the military and police could have their pension specially managed by a special body to guarantee their privacy and future, why would university workers not have their pension managed by special body of their choice whom they have confidence in?

Meanwhile, while contributors await the commencement of the transfer window, a lot of marketing intrigues have been employed by PFAs to enhance their market share in the pension industry.

Going by their operations and services to their contributors all these years, there are signs that when the exercise takes off, some PFAs may lose some contributors to firms that offer superior services and are professionally managed.

At present, the PFAs are strategising on how to grab larger shares of both the existing and emerging markets and remain on top in the areas of asset size and number of contributors.

Indeed, with the prevailing signs of both offensive and defensive marketing tactics currently unfolding in the industry via various communication channels that include outdoor advertising, promotions, radio and television commercials, social media, sales activities, and other visibility campaign strategies employed by the operators, there are palpable fears that when the transfer window takes off, the industry may be left with few giant operators while many will fall by the way side.

Among the licenced PFAs, five big operators usually dominate the market.

Recent data showed that these five account for over half of the N11 trillion RSA assets.

While among the 21 licenced operators, top 10 PFAs manage 88.20 per cent of the total RSA assets and the last 10 PFAs accounts for 8.74 per cent of the RSA assets under management.

Among the leading five by size of assets under management and number of registered contributors are:

ARM Pensions, Stanbic IBTC pensions, Premium Pension Limited and Sigma Pensions Limited,

As the industry looks forward to reap bountifully from the emerging micro pension market which the regulator kicked off barely two years back, PFAs are positioning themselves to enhance their visibility in the emerging market.

Referring to competition in the industry, Price Waterhouse Coopers in its recent report on activities in Nigerian pension sector stated:

“PFAs are developing clear client value propositions and targeting specific contributor market segments as the race for leading market share intensifies,” adding that technological advancement is, “bringing in several non-traditional players who will provide platforms for pension products and services.

In the days ahead, the strengths and weaknesses of each player will be further scrutinised as the battle for the minds of the consumers continues.”

The foregoing scenario undoubtedly provides insight to an intense battle for market share.

For most PFAs, the pension transfer window will provide the ideal opportunity for both turf defense and customer acquisition.