Addressing Regulatory Challenges Of Pension Industry

Key initiatives conceived to propel the pension industry to lofty heights have in recent times been stalled by the laxity exhibited by the management of the National Pension Commission (PenCom). This reporter in this report examines the initiatives and how they can be reinvigorated to meet set objectives.

The enactment of the Pension Reform Act (PRA) 2004, which paved way for the introduction of the Contributory Pension Scheme (CPS), brought great relief to pensioners as they were saved from the hardship suffered by their colleagues who retired under the Define Benefit Scheme (DBS).

However, the CPS, within 13 years, grew the pension assets from a deficit of almost N2 trillion in 2004 to a robust contributors’ fund of N7.52 trillion as at the end of December 2017, a feat achieved through proper implementations of regulatory policies and initiatives.

Despite the success of the new pension scheme, there are still some grey areas begging for serious attention.

For instance, key initiatives such as: Transfer window; mortgage financing; Consumers engagement; management of annuity; micro pension scheme; pension debt recovery amongst others , have stalled, as the regulator, in the last one year, have done little or nothing to put these laudable initiatives in motion.

Funding of the Pension Protection Fund

Section 82(1) of the PRA 2014 provides for the establishment of the Pension Protection Fund (PPF) which is, amongst others, to be utilised for the funding of the Minimum Pension Guarantee (MPG) to be paid to all Retirement Savings Account (RSA) holders who have contributed for a number of years to a licensed Pension Fund Administrator (PFA) and for the payment of compensation to eligible pensioners for shortfall or financial losses arising from investment activities.

The sources of funding of the PPF includes an annual subvention of 1 per cent of the total monthly wage bill payable to employees in the Public Service of the Federation, which shall be utilised strictly for the funding of the MPG.

Yet, as laudable as it sounds, the pension industry regulator, PenCom, has failed to mount any serious pressure on government to conform with this directive.

Opening of Temporary RSA for Employees

The Pension Reform Act(PRA) 2014 makes provision that would compel an employer to open a Temporary Retirement Savings Account (TRSA) on behalf of an employee that failed to open an RSA within three (3) months of assumption of duty. But it is pathetic that nothing much has been done to engage employers in a bid to implement this provision.

Consolidation of Previous Legislations Amending the PRA 2004

The Pension Reform Act 2014 has consolidated earlier amendments to the 2004 Act, which were passed by the National Assembly. These include the Pension Reform (Amendment) Act 2011 which exempts the personnel of the Military and the Security Agencies from the CPS as well as the Universities (Miscellaneous) Provisions Act 2012, which reviewed the retirement age and benefits of University Professors. Furthermore, the 2014 Act has incorporated the Third Alteration Act, which amended the 1999 Constitution by vesting jurisdiction on pension matters in the National Industrial Court. As good as these legislations are, implementation is a major problem.

Transfer window

While pension contributors, over the years, have been anxiously waiting for the transfer window to port from their fund managers to other better service providers, the future looks gloomy, as the waiting game continues, even though, PenCom is not making any tangible move to kickstart the transfer window.

Mortgage financing

One of the unique features of the PRA 2014 is the law that empowers contributors to access parts of their contributions for residential mortgage.

The PRA 2014 made provision that allows contributors seeking to own their primary homes, to apply part of their retirement savings account balance balances as equity contribution for residential mortgage, subject to the guidelines issued by the commission.

PenCom has assured that when the act is implemented, the development would assist in bridging the housing deficit in Nigeria, but this dream is fast fading as little or nothing is being done presently to make it work.

Informal Sector Participation

The Act expanded the coverage of the CPS in the private sector organisations with three (3) employees and above, in line with the drive towards informal sector participation is one development if properly harness, would expand the frontier of the scheme as more money will be injected into the coffers of the operators.

The initiative would also help boost the saving culture of people who are not in structured employment. The previous administration at PenCom did a nationwide awareness and education campaign across the country in a bid to mobilise trade groups to embrace the initiative, but the steam has gone down with the present administration

Upward Review of Rate of Pension Contribution

The Pension Reform Act 2014 reviewed upwards, the minimum rate of Pension Contribution from 15 per cent to 18 per cent of monthly emolument, where 8 per cent is contributed by the employee and the remaining 10 per cent by the employer. This was expected to provide additional benefits to workers’ Retirement Savings Accounts(RSAs) and thereby enhance their monthly pension benefits at retirement. Although, the private sector seems to be gradually adopting the new monthly contribution, the public sector is still lagging behind in its implementation.

According to the commission, the failure to implement the section of the law by states and federal government has left retirees with just 15 per cent benefits.


The feud between pension operators and life insurers has continued to linger as the leadership of PenCom has been unable to finalise with insurers on the way forward for annuity business.

Reliable sources said nothing has been done by the present administration to finalise the discussion which was in place before the change in leadership.

Pensioners’ perspective

The Chairman, NTA Association of Contributory Pensioners, Alhaji Gbadebo Omolaja,said the commission is not proactive to the complaint and observations of the pensioners about the shortcomings in the system, adding that several pensioners were yet to receive their entitlements almost a year after retirement from service, calling on PenCom to address this loophole.

While appealing to the federal government to recall PenCom from its sabbatical on the affairs of pensioners, since the welfare of all retired civil servants is one of the major responsibilities of the commission, they equally implored the National Assembly to extend their over-site functions to the welfare of contributory pensioners and make necessary amendment to Pension Act on all the shortcomings observed.

According to them, “It is our hope that PenCom would be alive to its responsibilities and the welfare of the contributory pensioners, because the secrecy under which PenCom operates is unexpected and worrisome.”


Until and unless the current administration lead by example by addressing all the highlighted challenges, the commission could be working through a tight rope.

Implementation of policies had make pension industry grows in leap and bound over the years, but that growth could be retrogressive if the commission under the current management continues its ‘Sit down dey look’ attitude.


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