The Role of Recovery Agents in the Pension Industry, a Publication by PenCom
In its effort to ensure compliance with the provisions of the PRA, 2014 by Private Sector Employers and mitigate the complaints from employees and PFAs on non-remittance of pension contributions by Private Sector Employers, the National Pension Commission (PenCom) invoked Sections 92 and 93 of the PRA, 2014 which empowers it to authorize the examination, inspection or investigation of an employer relating to pension funds or assets.
Accordingly, PenCom appoints Recovery Agents to carry out the examination of private sector employers to determine their level of compliance. The Pension Reform Act 2014 (PRA, 2014) provides that every eligible employee shall maintain a Retirement Savings Account (RSA) with any Pension Fund Administrator (PFA) of choice.
Once an RSA is opened, it is the responsibility of the employee to inform his/her employer by submitting the RSA Personal Identification Number (PIN) issued by the PFA. Subsequently, the employer is required to deduct at source, the monthly contributions of the employee, not later than seven working days from the day salary is paid, remit an amount comprising of 8 percent employee and 10 percent employer contribution to the Pension Fund Custodian (PFC) specified by the Pension Fund Administrator (PFA) of the employee.
It should be noted however, that the 18 percent pension total monthly pension contribution is a prescribed minimum as the employer may elect to increase the rate or bear the whole burden on behalf of the employee.
Section 11 (6) of the PRA, 2014 states that an employer who fails to deduct or remit the contributions within the stipulated time frame of seven working days from the day salaries are paid, shall in addition to making the remittances already due, be liable to a penalty, which shall not be less than 2 percent of the total contributions that remain unpaid for each month or part of each month the default continues and the amount of the penalty shall be recovered as a debt owed and paid into the employee’s RSA.
The recovery of outstanding pension contributions as carried out by appointed Recovery Agents (RAs) commenced in July, 2012 with the appointment of 173 firms.
The exercise set out to achieve amongst others, the recovery of all unremitted pension contributions of employees with penalty so as to ensure that affected employees do not lose any income that they would have earned from investment of the funds, secure full compliance of organizations with the PRA 2014, and also, reduce complaints of non-remittance of pension contributions by employees’ thereby boosting confidence and acceptability of the Contributory Pension Scheme (CPS).
The recovery process requires the Recovery Agent to diligently follow the outlined steps which commences with obtaining a list of assigned defaulting employers from PenCom, getting letters of introduction from the Commission to the employer introducing the RA and requesting the employer to cooperate with the RA for a thorough review of pension records with the organization’s Human Resources Department so as to determine liabilities, serving demand notices to employers to outstanding pension liabilities plus penalties.
Recovery Agents are mandated by the Commission to follow up with the defaulting employers to ensure remittances of outstanding pension contribution. Evidence of payments are obtained and forwarded to the Commission for onward confirmation by the PFCs.
So far, the Recovery Agents have made recoveries totaling N19.90 billion comprising principal contributions of N10.34 billion and penalties of N9.56 billion between July, 2012 and August, 2021 and all paid into employees’ RSAs. It is pertinent to note that penalties recovered from outstanding pension contributions are paid into employees’ RSAs to make up for the accruable income from investment of pension funds which may have been lost due to non or late remittances by employers.
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