Pension Insight: PenCom enhances pension services nationwide through PFAs branch expansion

The National Pension Commission (PenCom) has significantly broadened the reach and effectiveness of pension services in Nigeria.

In a recent circular directed at licensed pension fund administrators (PFAs), the commission outlined measures for establishing and operating branch offices and service centres. This move directly responds to the increasing demand for pension services nationwide.

In addition to the above, other objectives of PenCom are to significantly enhance the geographical coverage of PFAs and elevate their service delivery to Retirement Savings Account (RSA) holders. Since its inception, the contributory pension scheme (CPS) has enrolled over 10 million RSA holders.

Pension assets have grown significantly, increasing to N17.29 trillion as of August 2023. The expansion of the CPS in Nigeria has led PenCom to recognise the urgent need for an increased presence of PFAs nationwide.

LEGAL BACKING FOF PFAs EXPANSION

Section 72 of the Pension Reform Act of 2014 (PRA 2014) empowers PFAs, subject to the approval of PenCom, to establish branch offices within or outside Nigeria.

This provision enables a strategic and regulated expansion of the presence of PFAs, aligning with the increasing requirements for pension services across the nation.

The circular issued in August 2023 consolidates the conditions for opening branch offices and service centres in one document.

Furthermore, the circular established new standards that PFAs must meet regarding their branches. PenCom emphasised the necessity for physical presence to meet pension consumers’ demands.

PFA REQUIREMENTS FOR BRANCH OPENING

Each PFA must open a branch office in any state with up to 10,000 funded RSAs. Moreover, for every additional 10,000 funded RSAs, PFAs must establish a service centre in a different location within the state. PenCom also mandates PFAs to open a service centre in a state with up to 2,000 funded RSAs.

In 2021, PenCom raised the minimum regulatory capital (shareholders’ fund) requirement for PFAs from N1 billion to N5 billion in a move aimed at fortifying the financial capacity of PFAs. By April 2022, all PFAs had successfully met the new shareholders’ fund requirements.

The recapitalisation has empowered PFAs to improve their capabilities in managing the increasing number of RSA holders and pension assets and expand branch operations.

The expansion of branches promises to foster increased participation among those mandatorily covered under the CPS.

Furthermore, this expansion will facilitate and catalyse voluntary enrollment in the micro pension plan (MPP) among informal sector workers and the self-employed.

In emphasising the role of PFAs, PenCom highlighted their responsibility to create awareness and understanding of the CPS operations among employers, employees, and micro pension contributors (MPCs).

This initiative underscores the objective of enhancing financial inclusivity and extending pension opportunities across various sectors of the workforce nationwide.

PFAs’ MANDATES AND OPERATIONAL GUIDELINES

PFA branch offices and service centres offer essential services, including registration and enrolment of contributors, updating records, and handling pension contribution schedules.

Additionally, they process benefits applications, address enquiries, and provide comprehensive support services to RSA holders.

The circular outlined staffing requirements for PFA branches and service centres. The aim is to ensure that the offices are staffed with qualified, experienced individuals.

The directive also strongly emphasised appropriate infrastructure, including suitable office spaces, robust ICT facilities, alternative power sources, and safety measures at branch offices and service centres.

It also prohibited co-locations to maintain operational clarity and visibility. PenCom has allowed a 12-month transition period for PFAs to adapt to the new requirements, ensuring a phased and systematic implementation to meet the stipulated conditions.

In conclusion, this drive for a more significant geographic presence and improved service delivery signifies a substantial leap towards ensuring comprehensive access to pension services while enhancing service quality for RSA holders nationwide.

PenCom remains committed to the effective regulation and supervision of the Nigerian Pension Industry to ensure that retirement benefits are paid as and when due.

Based on information by the National Pension Commission (PenCom).