TheCable

The National Pension Commission (PenCom) has raised concerns over the growing number of pension contributions yet to be credited to employees’ retirement savings accounts (RSAs).

In a statement on Friday, PenCom said the inability of employees and employers to provide complete documentation has prevented pension fund administrators (PFAs) from crediting RSAs.

PenCom called on both employers and employees to take steps towards addressing the problem.

The agency asked employers to ensure that they provide complete documentation when remitting pension contributions, adding that employees must also open an RSA and provide the account details to their employer.

PenCom warned that failure to comply with the directive before December 31, 2023, could result in the activation of regulatory actions against employers.

“Non-compliance comes with significant implications. PenCom has reiterated that failure to comply with this directive by December 31, 2023, will trigger regulatory actions against non-compliant employers, as stipulated in the PRA 2014,” the statement reads.

“PenCom emphasises that this is a rallying cry for employers and employees to embrace responsibility.

“All hands must be on deck to overcome the challenge of uncredited contributions to achieve the objective of a future of secure retirements, unburdened by financial uncertainties.”

Speaking on the import of compliance, the agency said the essence is to establish a financial safety net for employees in their golden years, allowing them to enjoy the fruits of their labour without any financial constraints.

The body said the PRA (Pension Regulations Act) 2014 instructs employers to remit the pension contributions of their employees who have not opened RSAs into nominal RSAs with a PFA designated by the employer.

A nominal RSA, according to PenCom, is a temporary RSA established for an employee eligible for pension contributions but has not yet chosen a PFA to manage their pension funds.

“When an employee becomes eligible for pension contributions under the CPS but has not selected a PFA or provided the RSA details to his employer, the employer is still obligated to make contributions on behalf of the employee. As a result, the employer sets up a nominal RSA with a PFA of their choice,” the agency explained.

The commission said the nominal RSA serves as a temporary holding account for the contributions until the employee provides information about their RSA.

PenCom noted that once an employee completes the necessary paperwork and selects a PFA, his accumulated contributions from the nominal RSA are transferred to the designated RSA in the selected PFA.

“However, certain employers have fallen short of meeting their obligations, generating far-reaching consequences,” the body said.

“Incomplete documentation and the failure to convert nominal RSAs into personalised RSAs obstruct the smooth and timely crediting of pension contributions, directly impacting the contributors’ benefits.”

The commission stated that a list of employers and employees who are affected by the issue has been published on its website, adding that “this list will be updated regularly”.

PenCom said all hands must be on deck to overcome the challenge of uncredited contributions to achieve the objective of a future of “secure retirements, unburdened by financial uncertainties”.