New Vista for Pension Sector

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The National Pension Commission recently unlocked the long awaited pension transfer window. In this report, Ebere Nwoji looks at the expectations from the pension sector, especially the competitive challenges thrown up by the initiative

After 16 years of waiting for the commencement of the pension transfer window, Nigerian workers contributing into the Contributory Pension Scheme (CPS), can now heave a sigh of relief as the National Pension Commission (PenCom) finally, on November 16th, commenced the exercise.

The pension transfer window is an avenue that allows contributors into CPS who are dissatisfied with the services of their existing Pension Fund Administrators (PFA) to move to another operator. It is one aspects of the pension Reform Act 2004 amended in 2014 that had remained unimplemented until its launch.

Going by the Pension Reform Act 2014 which established the CPS, the transfer window ought to have become operational the same year the CPS started or perhaps a year after when contributors must have experimented with a PFA of their choice and take decision for a change. But this did not happen despite the agitations by contributors who have one problem or the other that would warrant change of their fund administrator.

Reason often given by both PenCom and PFAs for the delay was registration and biometrics problems.

PenCom, had said it wanted 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.

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 but none of these came to reality until last week when PenCom made good its promise to implement the initiative.

Managing Director, UBA Pension Custodian, Mr. Bayo Yusuf, once told the media that part of the delay was because PenCom and the PFAs have been having engagements to ensure smooth take off.

PenCom also said it was developing an Enhanced Contributor Registration System (ECRS), an electronic platform for the submission of requests by PFAs for the registration of contributors and issuance of Personal Identification Numbers (PINs). The Commission, had insisted that until it successfully develops the system, it will not commence the transfer window.

But while the commission was experimenting on these, a lot of challenges that created need for workers to change from one PFA to another continued to arise.

Some of these problems left the contributors more frustrated.

But at the official launch of the transfer window, the Director General PenCom, Aisha Dahiru Urma, told contributors that the Commission was unable to embark on the full implementation of the RSA transfer policy due to challenges hitherto experienced in its contributor registration system.

“These challenges were largely hinged on technology, given that in the early days of the pension reform, contributor registration did not include a biometrics component. However, the commission has renewed its commitment towards taking the pension industry to greater heights by undertaking the in-house development of some computer applications that are required to enable the opening of the RSA transfer window.

The commission therefore, developed and deployed the Enhanced Contributor Registration System (ECRS) in June 2019,” she said.

She said in order to facilitate RSA holders’ ability to make informed choices, the commission had expanded its minimum disclosure requirements, by providing more statistics on pension industry performance.

She also said a special section has been created on the commission’s website, containing relevant information on the RSA transfer, to guide RSA holders.

According to her, the activation of the RSA transfer was expected to result in improved service delivery across the pension industry, as Pension Fund Administrators engage in healthy competition.

Findings showed that had the commission kicked off the transfer window between 2015 and 2018, many PFAs would have lost their contributors to the big players.

Also, this long delay in the commencement of the transfer window was the reason some sector workers opted for their own specialised PFA.

A typical example was the case of university workers who insisted on getting license for their own specialised PFA tagged, ‘NUPENCO.’

Before the license was granted, the Chairman ASUU, University of Lagos chapter, Dr. Kari Ogbinaka, had in an interview, told THISDAY that he was personally disgusted with a lot of irregularities and lack of transparency in handling of his contributions by his PFA .

According to him, this was worsened by the fact that all efforts to get the anomalies corrected yielded no result. Also attempt to migrate from the PFA to another was rejected by PenCom.

Also Dr. Emeka Anorue, a lecturer in the Department of Mass Communication, University of Nigeria Nsukka, told THISDAY that the reason university workers opted for a separate PFA to manage their fund was lack of confidence in their various fund managers and lack of liberty to migrate to another fund manager due to non-commencement of the transfer window.

Similarly, within this period of delay, workers from aviation sector, started agitating for licensing of their own separate fund manager for the same reason of misgivings with their fund managers and lack of liberty to migrate to a new fund manager.

While the university workers had their way last year with the licensing of the University Pension Company (NUPENCO), the aviation sector workers are yet to have their way.

With the commencement of the transfer window, expectedly, there is an ongoing race among PFAs to outwit each other in terms of customer service delivery.

Indeed, a lot of marketing intrigues have been employed by PFAs to enhance their market share in the pension industry.
Going by their operations, 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.

Unlike before when PFA marketers sit tight only for workers’ contributions to be flowing into their companies’ account, the reverse is the case as there are offensive and defensive marketing tactics currently unfolding in the industry physically.

It is expected that soon, the operators will employ various communication channels that may include advertising, promotions, radio and television commercials, social media, sales activities, and other visibility campaign strategies.
Indeed, pension sector marketers are beginning to be more aggressive than banking and insurance marketers as it is fast becoming the survival of the fastest.

Recent data on market share of operators showed that five companies 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.

As the industry looks forward to reap bountifully from the emerging micro pension market which the regulator kicked off barely two years back, the 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.”

It added that technological advancement was 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., it observed.

Apparently, the take-off of the pension transfer window For most PFAs, will provide the ideal opportunity for both turf defense and customer acquisition while for some , it will spell a doom and end of their business career.

On their part contributors have different views about the take off of the much delayed transfer window.

Some said at this stage , changing their fund manager is not their priority but better condition in the management and disbursement of their fund.

According to Mr. Segun Bankole of Sovereign Trust Insurance Plc, instead of PenCom talking about transfer window now, it should have focused on modifying the law to allow contributors who are up to 55 years of age and still in active service to access a quarter of the fund while in service instead of the existing law that allows them to access 25 percent after retirement.

Also, Mr. Orokunle Olaitan, a staff of Lagos State Inland Revenue Service, said he has no reason migrating to another PFA at this time.

According to him, what is more important is to make the CPS functional through timely payment.

He said personally what worries him is that even with the CPS, there is much delay in payment of retirement benefits to retirees.

He said some of his colleagues who retired two, three years ago were yet to receive their benefits .

Two other workers who do not want their identity and PFAs said the window transfer take off was a blessing to them as they were warming up to change their fund managers.