.Incomplete documentation hindering crediting of RSAs
The National Pension Commission (PenCom) has raised a red flag regarding uncredited pension contributions, shedding light on a problem that needs immediate attention. The main issue lies in incomplete documentation from employers, resulting in Pension Fund Administrators (PFAs) being unable to credit Retirement Savings Accounts (RSAs) of affected employees.
In a recent statement, PenCom expressed concerns about the growing pile of uncredited pension contributions in the accounts of PFAs. The commission has called for strict compliance from employers and contributors to address this matter promptly. The inability of PFAs to credit the RSAs of employees could potentially affect their retirement plans. As a result, it is critical to act quickly to correct the situation.
The Pension Reform Act 2014 (PRA 2014) is a pivotal piece of legislation aimed at safeguarding the retirement future of Nigerian workers. By virtue of this legislation, employers who employ three or more workers must make pension contributions to their employees’ RSAs, which PFAs expertly manage. The essence is to establish a financial safety net for employees in their golden years, allowing them to enjoy the fruits of their labour without any financial constraints. The PRA 2014 further instructs employers to remit the pension contributions of their employees who have not opened RSAs into nominal RSAs with a PFA designated by the employer.
A nominal RSA is a temporary RSA established for an employee eligible for pension contributions but has not yet chosen a PFA to manage their pension funds. When an employee becomes eligible for pension contributions under the CPS but has not selected a PFA or provided the RSA details to his employer, the employer is still obligated to make contributions on behalf of the employee. As a result, the employer sets up a nominal RSA with a PFA of their choice. The nominal RSA serves as a temporary holding account for the contributions until the employee provides information about their RSA. Once the employee completes the necessary paperwork and selects a PFA, his accumulated contributions from the nominal RSA are transferred to the designated RSA in the selected PFA.
However, certain employers have fallen short of meeting their obligations, generating far-reaching consequences. Incomplete documentation and the failure to convert nominal RSAs into personalised RSAs obstruct the smooth and timely crediting of pension contributions, directly impacting the contributors’ benefits.
Taking proactive steps to rectify this situation, PenCom has made a list of the employers and employees affected by this issue publicly available on its official website and the websites of PFAs. This transparency not only underscores the gravity of the matter but also showcases PenCom’s commitment to fairness and accountability.
Employers and employees featured on the list should swiftly provide the required information to their respective PFAs. This action is essential in accelerating crediting the withheld pension contributions into the employees’ RSAs. Employers on the list that comply will contribute to securing their employees’ financial well-being.
Non-compliance comes with significant implications. PenCom has reiterated that failure to comply with this directive by December 31, 2023, will trigger regulatory actions against non-compliant employers, as stipulated in the PRA 2014.
PenCom emphasises that this is a rallying cry for employers and employees to embrace responsibility. All hands must be on deck to overcome the challenge of uncredited contributions to achieve the objective of a future of secure retirements, unburdened by financial uncertainties.
As the deadline approaches, PenCom reiterates its commitment to effectively regulating and supervising the pension industry. With collaboration between stakeholders and a steadfast commitment to compliance, the pension landscape can provide a secure foundation for employees’ post-retirement lives.