National Pension Commission (PenCom) in compliance with the provisions of Section 69 (f) of Pension Reform Act 2014, has mandated that all Pension Fund Administrators (PFAs) and Pension Fund Custodians (PFCs) must have Fidelity Insurance Cover for all their Staff.
Fidelity Insurance Cover protects Pension Funds and Assets from any risk associated with actions or inactions of employees of PFAs and PFCs, like dishonesty, negligence, fraud, forgeries and other fraudulent acts that may result in financial losses.
Below is the Circular from PenCom
Circular on the Implementation of the Requirement for the Provision of the Fidelity Insurance Cover for Employees of PFAs/PFCs
Section 69 (f) of the Pension Reform Act (PRA 2014) mandates Pension Fund Administrators (PFAs) and Pension Fund Custodians (PFCs) to provide annual Fidelity Insurance Cover for all staff to the full value of the pension funds and assets managed or held by them or as may be determined by the Commission.
The Fidelity Insurance cover will protect the pension funds and assets from any risk associated with actions or inactions of employees of PFAs and PFCs like dishonesty, negligence, fraud, forgeries and other fraudulent acts that may result in financial losses.
The Commission is aware that based on the current value of the assets under management and custody in the industry, providing Fidelity Insurance Cover up to the full value of pension assets would have astronomical costs implication to Pension Operators.
In addition, the Commission has taken cognizance of the subsisting Guarantees provided by the parent companies of PFCs for the full value of pension funds and assets held in custody on behalf of Retirement Savings Account (RSA) holders or their beneficiaries.
In view of the foregoing, the Commission has leveraged on the discretionary powers granted it by Section 69 (f) of the PRA 2014 with regards to the determination of an appropriate level of Cover and has, therefore, made the Fidelity Insurance Cover to be a percentage of the Shareholders’ Fund of a PFA/PFC.
Consequently, all licensed PFAs and PFCs are required to procure a Fidelity Insurance Policy to cover a minimum of 2% of Shareholders’ Fund as annual Fidelity Insurance Cover for their employees. The Shareholders’ Fund shall be based on the last audited accounts of the PFA/PFC.
The 2% provision on the Shareholders’ Fund shall exclude the statutory reserve (and value of real estate financed by Shareholders).
This Circular was released on 18 June 2019 and it is effective immediately.
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