5 background checks to make before picking PFA – Expert
If you are a new employee, it is important you carry out some background checks on Pension Fund Administrators (PFAs) before you open your Retirement Savings Account (RSA) with any of them.
The reason is simple: once you open your RSA with any PFA, you will not be able to move your contributions to another PFA until the National Pension Commission (PenCom) opens the transfer window.
This simply means that if you find out something you are not comfortable with your PFA, you are trapped as you cannot switch to another PFA that you are more comfortable with.
The Pension Reform Act, 2004 (amended 2014) provides for a transfer window that will enable RSA holders to transfer their savings from one PFA to another but this provision has been in limbo 14 years after the introduction of the Contributory Pension Scheme (CPS).
Speaking exclusively to Daily Trust, a pension expert, Mr. Joshua Ibrahim, said to avoid regrets, before choosing PFAs, new employees should carry out background checks on their service delivery, transparency, timeliness of pension pay-outs, returns on investment and accessibility.
Mr. Ibrahim, an economist and a former banker, said one way to know a good PFA is to walk into their office and ask the front desk staff for advice on opening an RSA.
“It is just like a bank. If workers of a PFA are hostile or impolite, it tells more about the PFA’s service delivery. Take note of how long it takes them to attend to you,” he advised.
Secondly, in addition to checking their service delivery, he advised that intending RSA owners should speak to people who already have accounts with the PFA and ascertain if the PFA is transparent enough in sending periodic statements of accounts.
“They are supposed to send you monthly or quarterly accounts, detailing your contributions and growth from investments,” he said.
In a recent investigation carried out by Daily Trust, it was discovered that many PFAs are not transparent enough in disclosing their returns on investments on their websites.
It was found that while all the PFAs displayed their unit prices, some did not display their return on investment on their website.
Commenting on the need to make public return on investment as part of transparency, Mr. Ibrahim said such disclosure should also guide individuals in choosing their PFAs.
A recent finding showed that in 2017, while some PFAs recorded single digit return on investment, some PFAs recorded double digit, including a particular PFA that recorded over 20 per cent return on investment.
Finally, the expert advised that employees should find out if the PFA they want to choose has an office nearby for ease of access as well as how timely it pays pension to their retirees, individuals applying for lump sum payment or 25 per cent of their RSA balance as a result of job losses.
“Don’t just pick a form and open an account with any PFA. Profile the administrator before you take the decision,” he counselled.