Let pension competition begin
Fund administrators prepare for battle ahead But industry already in hand of Big Guns Contributors welcome being spoilt for choice
THE NATION AL PENSION COMMISSION (PenCom) recently opened a transfer window for the Retirement Savings Account (RSA) under the Contributory Pension Scheme (CPS), allowing for account holders to freely switch from one Pension Fund Administrator (PFA) to another within a year in line with Section 13 of the Pension Reform Act of 2014.
While PenCom referred to this development as one that would facilitate competition and fast-track the fastening of seatbelt by various pension companies, for companies already making waves and the ones that are yet to, stakeholders have expressed diverse opinions regarding the new development.
From the record, it could be inferred that out of 22 licensed operators, the top 10 fund administrators managed about 88.20 per cent of the total RSA assets, which is an indication pointing to the fact that just a handful that have already gained ground are able to leverage this advantage to attract more holders. The conventional practice, rather than opening door for competition has, in fact, led to segmentation into ‘the powerful and the less powerful caucuses in the pension fund management.
While pension fund houses like ARM Pension, Stanbic IBTC Pension, Premium Pension Limited and Sigma Pensions Limited stay at the top as the big guns of the industry, others are struggling just to cling on to the bottom position.
Activation of the RSA is expected to bring a new perspective into the pension market as operators would now rely heavily on developing individual fund administrators and bringing on board policies that would enable contributors to stay for good. Thus, it is channelling the route for broad competition amongst pension fund administrators.
Eric Fajemisin, the chief executive of Stanbic IBTC Pension Managers Limited, has already asserted that the transfer window is a positive development as it democratises pension fund management in Nigeria and also allows for pension fund contributors to select their preferred pension fund administrator. “This new development within the industry is a welcomed development as it is here to democratise the pension fund management in Nigeria, affording contributors the choice of a fund administrator. Over the years, we have leveraged our deep understanding of corporate governance to build the trust of our stakeholders and this has positioned us as the largest pension fund administrator in Nigeria by Assets under Management (AuM), worth over N3.5 trillion.”
In our attempt to get the views of some stakeholders on the new development, many contributors told Business A.M. that the window is considered as an opportunity to gain more pensioners, while operators have questioned the low turnout of Nigerians in opening a pension account and PenCom’s dwarfing several efforts directed at combating it.
A source at APT Pensions, one of the leading fund managers in Nigeria, who spoke to Business A.M. on condition of anonymity, noted that the scheme is advantageous for pension companies. She, however, thinks that PenCom should focus more on schemes that would enlighten people on how pension works and the availability of micro pension for non-government workers.
Similarly, Nancy Alogaga of Leadway Pensions, who holds a similar position as does Fajemisin, asserted that employees, through the newly opened window would have access to a fund administrator of their choice and not the ones chosen by their employers.
In Alogaga’s words, “It’s a good thing the window is opened for clients to switch their PFA. This would enable people to access their choice of fund managers. As you know, most people operate a pension account due to the choice of their employers, giving them a specific PFA to open with; but with this, everybody has multiple choices to choose from.”
A pension fund contributor who spoke with Business A.M. offered the view that activating the transfer window is a welcomed idea as it would allow account holders to select which operator they deal with. He further noted that the constraints experienced by holders on transacting with a certain fund administrator imposed on employees by employers can now be abolished in this democratized system.
“My current pension account was forced on me when I attended a certain programme. The activation would allow someone like me to be able to change administrator if I am unsatisfied with the services of my operator,” he said.
Meanwhile, PenCom, the regulatory commission of the pension industry officially kick-started the transfer window under the Pensions Reform Act of 2014 in a bid to afford pension contributors the opportunity to choose their fund managers. Also, the new initiative is seen to breed competition among fund administrators with the aim to make solid the industry by making it more competitive.