How Custodian’s & PFA’s roles as Pension administrators help PenCom
In line with its mandate, the National Pension Commission (PenCom) has been making sure that every public servant sacrifice part of his/her income to secure tomorrow. Not even their employers are left of this the Contributory Pension Scheme (CPS) .
But a quest on the CPS will be taken up at next edition of this column. by our in-house pension expert in a bid to answer a question sent in by a reader:
Who Are the Pension Funds Custodian and how are they part of the of new pension programme under PenCom’s supervision?
Bisi Olaniyi, Lagos
Answer : “Nigeria Pension sector features an organized ecosystem of participants with distinct roles by various organs recognized the regulatory ambit of PenCom, ” according the PenCom Act of 2014, as amended.
The organs are private-sector driven, which is the beauty of the scheme. thus, they include the following:
Pension Fund Custodians (PFCs) will be responsible for the warehousing of the pension fund assets. They hold the assets on behalf of the Pension Fund Administrators (PFAs), shall not be allowed to hold the pension funds assets.
The employer sends the contributions directly to the Custodian, who notifies the PFA of the receipt of the contribution and the PFA subsequently credits the retirement savings account of the employee.
The Custodian will execute transactions and undertake activities relating to the administration of pension fund investments upon instructions by the PFA. The custodian shall hold pension fund assets on trust for its clients.
For the same reason given in the case of the PFA, a stakeholder as a Custodian must be a licensed financial institution and have a minimum net worth of N5,000, 000, 000 and a total balance sheet of not below N125, 000,000,000.
Thus, the shareholders of a Custodian must guarantee the pension fund assets held by it. This helps in guaranteeing the stability and reliability of the pension scheme in the past decade.
The Pension Funds Administrators as part of PenCom Administrators.
The new pension scheme requires pension funds to be professionally managed. Hence the PenCom Act provides for the involvement of privately oriented system that has licensed some firms ax the Pension Fund Administrators(PFAs) .
Also read Why PenCom Is Still Calling The Shots
These PFAs have been duly licensed to open Retirement Savings Accounts for employees, invest and manage the pension funds in a manner as the Commission may from time to time prescribe, maintain books of accounts on all transactions relating to the pension funds managed by it, provide regular information to the employees or beneficiaries and pay retirement benefits to employees in accordance with the provisions of the Pension Reform Act 2004.
Before any firm is issued with an operating licence, the PFA must be a limited liability or company whose sole object is the management of pension funds. To discourage frivolous applications and to ensure credibility, such company must have paid up a share capital of N1,000, 000,000 and demonstrate professional capacity to manage pension funds and administer retirement benefits.