Prior to the commencement of the Contributory Pension Scheme in 2004,
Nigeria operated the Defined Benefit scheme which was challenged on many levels
with issues such as terrible service delivery by administrators of the scheme in
the form of delayed or non-payment of pension entitlements to retirees. As a
result, the Contributory Pension Scheme (CPS) was introduced, to among other
things, decentralise pension administration and establish an institutional
framework for the safety, management and custody of pension assets in favour of
all categories of workers in Nigeria. Pension Fund Administrators (PFAs)
licensed under the Pension Reform Act (PRA) have the responsibility to provide
customer service support to employees, invest pension assets under their
management, offer returns on the investments, and ensure prompt payment of retirement
benefits to retirees, in accordance with the provisions of the Act.

The CPS introduced the concept of portability of pension assets to
pension administration in Nigeria by granting to beneficiaries the statutory
rights to open retirement savings accounts with PFAs of their choice and to
carry along with them the account and the funds in the account from one
employer to another and/or from one PFA to another. Portability is however not
being fully exercised by employees, who are currently not able to carry along
with them, the funds in their retirement saving accounts from one PFA to any other
of their choice. This is due to operational challenges that the pension
industry has struggled with since portability was introduced under the 2004 PRA.
This means that currently, RSA holders, whose PFAs are underperforming in terms
of return on investments, are stuck with such PFAs as they cannot move their
contributions to PFAs with better history of high returns on investment or to
PFAs with better history of customer service. Against the backdrop of PenCom’s latest
timeline of December 2020 for the opening of the Transfer Window this article
aims at providing clarity on the key aspects of this important aspect of the


Legal Basis for Portability of Retirement Savings Accounts in Nigeria

What is commonly called ‘The Transfer Window’ means the coming into
effect of section 13 of the PRA. The PRA requires every employee to maintain a Retirement
Savings Account (RSA) in his name with any PFA of his choice. Section 13 of the
Act stipulates that, “subject to
guidelines issued by the Commission, a holder of a Retirement Savings Account
maintained under this Act may, not more than once in a year, transfer his
account from one Pension Fund Administrator to another
”. The employee need
not provide any reason for such transfer. This provision is, however, yet to
become operational due to challenges associated with the requisite IT application
and infrastructure, on the one hand, and management of the data of contributors
and pensioners, on the other.

The RSA holder’s choice to freely open his RSA and move the funds in the
RSA from one employer and or PFA to another was first introduced under section
11 of the 2004 PRA. The provision was retained under the 2014 Act and made subject
to guidelines issued by the National Pension Commission (PenCom). PenCom has
since issued Regulations for the Transfer of RSAs, first in 2012 and again in
2015, preparatory to the coming into effect of Section 13, even though it is
yet to open ‘The Transfer Window’, which will authorise PFAs to allow RSA
holders to transfer their RSAs from one PFA to another. It is unclear at this
point if PenCom will revise the 2015 Regulations in view of further changes
that it has introduced since then, such as the introduction of the Enhanced
Contributor Registration System (ECRS) to replace the former Contributor
Registration System (CRS).  

There are however, a few key points worth noting about the 2015 PenCom Regulations
for the Transfer of RSAs.  The
Regulations have four broad objectives, namely:

a.      seamless transfer of RSAs from one PFA to another;

b.     facilitating full and equitable pension assets portability within the
pension industry;

c.      enhancing ethical competition amongst the PFAs, and

d.     improving service delivery to RSA holders.

The Regulations, which make the benefit of the transfer available to
both employees and retirees, binds PFAs under the pain of sanctions. For
instance, a sanction of N200,000.00 per RSA and additional N100,000.00 daily
where the offence continues are to be imposed on any PFA/PFC that violates the
transfer processes as specified in the PenCom’s sanctions regime under section 5.0
of the Regulations.  


Challenges of Implementation
of a Data Governance Framework for the Pension Industry

The opening of the transfer window will facilitate full and equitable
pension assets portability within the pension industry, enhance ethical
competition amongst the PFAs and improve service delivery to RSA holders. This
is, however, not without challenges.

One of the major challenges to the opening of the Transfer Window is the
quality of the data that operators have over time collected about contributors
and pensioners. It is pertinent to note that at inception in 2004 contributors
were added to the CPS by PFAs without their bio-data and biometrics captured as
part of requirements for opening or operating an RSA. Registration of
contributors was concluded under a system known as the Contributor Registration
System (CRS), which was ill-equipped to ensure the integrity of the contributors’
data. This led to a situation of the pension industry’s data on contributors
and pensioners being of poor quality in terms of accuracy, completeness,
consistency, reliability and currency. There has therefore been the real concern
that until the matter of integrity and quality of extant contributors’ data is firmly
handled cases of identity theft and large-scale frauds may result from the opening
of the Transfer Window.


In order to address the issues on the quality of data on contributors
and pensioners, in 2019 PenCom developed and deployed the Enhanced Contributor
Registration System (ECRS) to facilitate an industry-wide data recapture exercise
for the over 9,039,748 RSA holders. The ECRS
consists of six major functions, namely, contributor registration to generate
unique pin, recapture for existing contributors, bio-data update, update of
signature (and picture where applicable), temporary PIN for employer-initiated
registration and RSAs verification service.


Furthermore, the ECRS, which replaces the former CRS, is integrated with
the National Identity Management Commission for authentication of the
uniqueness of individuals seeking to register under the CPS. This, it is hoped,
will greatly enhance the integrity of contributors’ data and also facilitate
the seamless operation of section 13 of the PRA. Also, integrating RSAs with
NIN and BVNs will help the PFAs to clean up their databases to combat identity
theft as well as prevent fraud in the pension industry.


Following the ECRS PenCom has announced the development of RSA Transfer
System (RTS), an e-platform to enable seamless RSA transfers. The RTS platform is
said to enable PFAs to electronically submit to receiving PFAs RSA transfer
requests initiated by RSA holders to receiving PFAs. As rightly noted by
PenCom, the full deployment of the RTS will, however, entail extensive training
of the PFA’s relevant personnel and simulation of the associated processes,
industry-wide. It should also include the plan to keep the general public
sufficiently informed about it.


At the back of the data management challenges of the industry, there is
also the issue of requisite IT infrastructure for the RSA transfer process. The
2015 PenCom Regulations require every PFA/PFC to deploy IT infrastructure,
which must have adequate storage and retrieval capability for a period of Ten
(10) years. In addition, every PFA/PFC is to achieve and maintain an IT infrastructural
level to be specified by PenCom, which shall include the following:

a.      Automated fingerprint capturing equipment for capturing fingerprints
(for PFAs), and

b.     Automated Document Management System.


It is needless to say that these infrastructural commitments will come at
a huge cost to PFAs that are already struggling with increasing operational
costs and dwindling returns on their investments of AuM. There is also the cost
to contributors and pensioners who must now make themselves physically available
for the data recapture exercise in order to continue the seamless operation of
their RSAs.


In anticipation of the increase in competition among PFAs from the
opening of the ‘Transfer Window’ section 2.2.38 of the Regulations provide that
all personnel of PFA/PFCs shall abide by the PenCom Code of Ethics and Business
Practices and respect the confidentiality of all information relating to the
transfer process. PFAs with a history of poor customer service will now also
have to worry about losing customers to other PFAs that the customers may


RSA Transfer Process under the 2015 PenCom Regulations for the Transfer
of RSAs

It is unclear at this point if PenCom will revise the 2015 Regulations
in view of further changes that it has introduced since the regulations were
issued in 2015, such as the introduction last year of the Enhanced Contributor
Registration System (ECRS) to replace the former Contributor Registration
System (CRS) and the development of the RSA Transfer System (RTS).


In order to ensure the effective implementation of RSA transfers, the
2015 Regulations established the Pension Administration System (PAS) as an
electronically driven infrastructure for handling inter-PFA RSA transfers in
order to remove potential bottlenecks associated with RSA funds transfers and
settlements. PAS, to be domiciled at PenCom, will warehouse all data on pension
matters relating to registered contributors/members. PAS is to have an
interface with all PFAs and Pension Fund Custodians (PFCs) to facilitate
transfers between the PFAs.


Section 2.2.14 of the 2015 Regulations further provided that the
transfer process could only be initiated by an RSA holder who has been duly
registered on PAS. To be registered on PAS an RSA holder must have his/her
bio-data and biometrics captured by his/her PFA and transmitted to PAS. PAS was
to operate the RSA Transfer Clearing Module (RTCM) to facilitate electronic RSA
balances transfers, automated direct debits and credits. The 2015 Regulations
state that the “RTCM shall serve as a
platform for the processing of Transfer of RSA from one PFA to another,
settlement of Net Transfer balances between PFAs, reconciliation of transfer
balances and monitoring of the transfer processes
”. It further provided
that the RTCM shall maintain an IT platform that facilitates seamless
coordination of transfer processes through a link that shall be accessed by
only authorised officials of the PFAs/PFCs.


The RSA holder intending to transfer his/her RSA to another PFA shall
obtain a Transfer Form, complete and submit it to the Receiving PFA with a copy
of certificate of registration or RSA statement of account issued by the
Transferring PFA (TPFA), and valid means of identification. If the beneficiary
is a retiree, he/she is also required to provide a copy of Programmed
Withdrawal Agreement (PWA) with the TPFA. This is because section 2.2.4 of the
2015 Regulations provided that only retirees on PWA are eligible for transfers.


Upon the receipt of a duly completed transfer form and authentication of
submitted documents, the receiving PFA shall electronically forward the RSA
transfer form and captured fingerprint images of the RSA holder to RTCM to
validate the form for completeness. If successful, RTCM shall forward the PIN, surname,
fingerprint images and Transferring PFA Code to the Registration Module of PAS
for validation.

The RTCM shall, within two working days from the date of receipt of the
transfer request determine the Effective Transfer Date (ETD) and electronically
communicate both the ETD and provisional approval to both Receiving and
Transferring PFAs and request the TPFA to forward the transaction history. On
the ETD, the Transferring PFA shall move the balance in the RSA to the TSA and
determine period of outstanding contributions if any. Upon completion of the
transfer process, the Receiving PFA shall notify the RSA holder of the transfer
value received within two (2) working days.


It is pertinent to note that all RSA balances to be transferred by the
Transferring PFA shall be in Naira value and shall be calculated based on the
unit price of the Transferring PFA’s RSA Fund as at the ETD. It is to be noted
further that RSA transfers under the Regulations shall attract no transfer fee.


Conclusion and Recommendations

The opening of the Transfer Window, long overdue, will facilitate full
and equitable pension assets portability within the pension industry, enhance
ethical competition amongst the PFAs and improve service delivery to RSA
holders. There should however be extensive training of the PFA’s relevant
personnel and simulation of the processes, industry-wide. RSA holders are
advised to immediately approach their PFAs to provide
their Bank Verification Numbers (BVNs), NIN as well as other required biodata

The sanctions regime under section 5.0 of the Regulations is not a
sufficient deterrence as the perceived gains from holding on to pension assets
to be transferred may outweigh the specified penalties for non-compliance. It
is suggested that penalties for non-compliance should be tied to a percentage
of the pension assets that are wrongfully withheld by a defaulting PFA. This
way, minor infractions will also not be over-penalised.

Also, the Regulations are silent on the procedure for establishing
breach by PFAs of the Regulations. This is important in view of the sanctions
regime, which is prone to abuse in the absence of a fair and transparent
dispute resolution mechanism. 


Finally, it cannot be over-emphasized that this exercise should be given
the maximum publicity so that the general public, especially stakeholders like
contributors and pensioners, are sufficiently informed on all the different
aspects of the exercise and its importance to the CPS and their retirement


Dugeri is a Lagos-based Legal Practitioner with specialties in Energy Law,
Employment and Capital Markets