The Pension Reform Act 2014 (PRA 2014) provides requirements for licensing of Pension Fund Administrators (PFAs) and Pension Fund Custodians (PFCs) prior to being entrusted with the management and custody of pension funds and assets.
Section 79(1) and (2) of the Act states that the Chief Executive Officer, Directors and Management Staff of PFA or PFC shall not be appointed without the prior written approval of the National Pension Commission (PenCom), and they shall also execute the code of conduct provided by PenCom.
PenCom authorizes inspection and examination of PFAs, PFCs, Federal Pension Transitional Arrangement Directorate and the Federal Capital Territory Transitional Arrangement Directorate at least once a year, for the purposes of determining whether or not the provisions of the Act or any regulations made thereunder are being complied with.
PenCom also entrenches sound corporate governance in the pension industry, which is strictly monitored through off-site supervision to review the reports submitted by the PFAs and PFCs on periodic basis; and on-site examination to physically review their books and records, on annual basis, to confirm that their operations are within the confines of the law.
Section 77(2) of the PRA 2014 prohibits a PFA from keeping any pension fund assets with a PFC in which it has any business interest, shares or any relationship whatsoever. After examination, any PFA, PFC or body in relation to pension matters found erring or not complying with the Act, shall be sanctioned and penalized according to the provisions of the Act.
Pension funds and assets are kept in safe custody by the PFC and, as such, the liquidation of the PFA will not affect the funds and assets. In such situations, PenCom will transfer the records of the failed or liquidated PFA to another PFA. In addition, every PFA is expected to maintain a statutory reserve fund, from its earnings, as contingency fund to meet claims for it may be liable.
Pension funds cannot be borrowed directly by Governments at Federal, States and Local levels. However, PFAs are allowed to invest pension assets in Treasury Bills issued by the Central Bank of Nigeria (CBN) or Bonds (including Sukuk) issued by the Federal or State Governments and approved by the Securities &Exchange Commission (SEC) and other relevant institutions.
The PRA 2014 provides PenCom with powers to order Special investigations of PFAs, PFCs or any person or body related to pension matters if it suspects that the PFA or PFC: has been carrying out business not in the interest of the RSA holders; does not have sufficient assets to cover liabilities; has contravened with the provisions of the Act among others.
The Act provides that every PFA or PFC shall employ a compliance officer who shall be responsible for ensuring compliance with the provisions of the Act and internal regulations of the PFA or PFC. In addition, he is to have relevant professional and cognate knowledge; report to the Chief Executive Officer of the PFA, PFC or PenCom on issues of non-compliance by the PFA or PFC; and liaise with PenCom with regards to any matter in which the opinion of PenCom will enhance the compliance of the PFA and PFC with the provisions of the Act.
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