Approval of benefits to holders of RSAs by licensed pension Fund operators

Report by the Director, Centre for Pension Rights Advocacy, Ivo Takor, mni Esq

The National Pension Commission (PenCom) has announced a significant shift in the process of approving and disbursing benefits to holders of Retirement Savings Accounts (RSAs) under the Contributory Pension Scheme (CPS). This move aims to streamline operations, enhance service delivery, and empower Pension Fund Administrators (PFAs) to fully execute their statutory responsibilities as outlined in the Pension Reform Act 2014 (PRA 2014).

Background

Over the years, PenCom has issued various regulations and guidelines to ensure transparency and accountability in the administration of retirement and terminal benefits. Specifically, Section 55 (f) and (g) of the PRA 2014 mandates PFAs to compute and pay retirement benefits to RSA holders. However, the practice had been that PFAs submitted all benefit applications to PenCom for review and approval before funds were released by the Pension Fund Custodians (PFCs) to beneficiaries.

Recognizing the need for greater efficiency, PenCom has now decided to delegate full responsibility for processing and paying most categories of retirement benefits directly to the PFAs.

Key Directives

Effective June 1, 2025, the following changes will take effect:

1. PFA’s Sole Responsibility for Approvals and Payments

PenCom will no longer approve or grant “No Objection” for the following benefit applications before PFAs process payments:

•Programmed Withdrawal: This allows retirees to receive periodic pension payments directly from their RSA balances.

•Retire Life Annuity: The purchasing annuity plans for consistent income post-retirement.

•Access to Benefits for Temporary Loss of Employment: Permitting withdrawals for individuals who lose their jobs and have been unemployed for at least four months.

•En Bloc Payment: payment of lump-sum to retirees whose RSA balances cannot provide a reasonable pension.

•Pre-PRA 2014 Benefits Payment: Payments to retirees in the private sector whose pension rights predate the current law.

•Voluntary Contributions: Withdrawal of voluntary contributions made over time.

•Equity Contributions for Residential Mortgages: Withdrawals to pay part of the down payment for home ownership.

•NSITF Contributions: Payments to retirees whose Nigeria Social Insurance Trust Fund contributions have been transferred to their RSAs.

•Changes in Periodicity of Pension Payments: Allowing retirees to adjust how frequently they receive pension payments.

• Resolution of Employer Remittance Errors: Correcting mistakes in pension remittances by private sector employers and self-funded agencies.

•Refunds to Exempted Persons: Processing refunds for individuals exempted from the CPS by the PRA 2014.

2. Faster Processing and Payment Timeline

•PFAs must process, approve, and instruct PFCs to make payments within two (2) working days once all necessary documentation is completed.

•PFCs are required to credit beneficiaries’ accounts within 24 hours of receiving instructions from PFAs.

•All payment instructions must be transmitted through the Shared Folders systemdeployed by PenCom, ensuring secure and transparent processing.

3. Exceptions Requiring PenCom’s Approval

Despite the delegation of most approval processes, PFAs must still forward the following applications to PenCom for approval:

•Depleted RSAs: For retirees whose accounts have run out of funds.

•Death Benefit Applications: in cases where payments are made to the legal beneficiaries of deceased RSA holders, as stipulated in Section 8(2) of the PRA 2014.

Implications for RSA Holders

This policy shift is a welcome development for RSA holders, as it reduces unnecessary delays in accessing their retirement benefits. The streamlined process will enhance efficiency, ensuring that retirees and other eligible beneficiaries receive their funds promptly.

Additionally, the continued oversight by PenCom, especially for sensitive cases like death benefits and depleted accounts, maintains a necessary layer of accountability and protection for RSA holders.

Conclusion

The approval of benefits under the CPS is a crucial aspect of ensuring that retirees enjoy a smooth transition into retirement. By allowing PFAs to handle the bulk of benefit processing independently, PenCom has reinforced its commitment to building a responsive and effective pension system.

RSA holders are encouraged to engage with their PFAs for more information and guidance on how these new directives may impact their benefit applications.