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The National Pension Commission (PenCom) says it is the right of employees to choose Pension Fund Administrators (PFAs) of their choice, or transfer to any without being coerced by either their employers or the operators.
According to the Commission, the choice of PFA and Retirement Savings Account (RSA) transfer are statutory rights of RSA holders and must not, under any circumstance, be influenced by their employers or their affiliates.
“Any act of inducement or compulsion whether direct or indirect undermines the integrity of the Contributory Pension Scheme (CPS) and the credibility of the RSA Transfer Process.
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PenCom in a circular to Licenced Pension Fund Operators titled: ‘Illegal and Unethical Practices Regarding Opening of Retirement Savings Account (RSA) and RSA Transfer’ signed by its head of surveillance A M Saleem said:
“The Commission shall not hesitate to take the following appropriate regulatory and legal actions on any LPFO or employer found to contravene the above directives”
“Imposition of monetary penalties and other regulatory sanctions as deemed necessary by the Commission in line with the provisions of the extant Regime of Sanctions and Penalties”
“Suspension of RSA Transfer window for the affected PFA, such that it can only participate as a Transferring PFA and not a Receiving PFA;”
“ Criminal prosecution of any employer or individual infringing on employees’ statutory rights to choose their PFA or transfer their RSA, contrary to the provisions of the PRA 2014 and relevant extant subsidiary legislations issued by the Commission.”
The Circular reads:
The National Pension Commission (the Commission) has observed with concern the illegal and unethical practices by certain financial institutions and employers, where their employees and those of their vendors are being coerced or unduly influenced to open or transfer their Retirement Savings Accounts (RSAs) with specific Pension Fund Administrators (PFAs), particularly those directly affiliated with the employer or indirectly through custody of their pension assets with Pension Fund Custodians (PFCs).
This practice is unacceptable and constitutes a clear violation of the following provisions of the Pension Reform Act (PRA) 2014 and relevant Regulation/Circulars issued by the Commission:
According to the Commission, section 11(1) of the PRA 2014 provides that every employee to whom the Act applies shall maintain a RSA in his/her name with any PFA of his/her choice.
That section 13 of the PRA 2014 also provides that, subject to the Guidelines issued by the Commission, a holder of an RSA may transfer his/her account from one PFA to another.
While Section 2.3 of the Commission’s circular on RSA transfers explicitly prohibits employers from influencing the choice of PFA by employees.
Accordingly, the Commission hereby issues the following warning and directives to all Licensed Pension Fund Operators (LPFOs) and employers:
LPFOs must not collude with employers or their agents to solicit, influence, or coerce employees to open RSAs or transfer their accounts with a specific PFA.
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Pension Fund Custodians (PFCs) were reminded as well of their fiduciary responsibility and must report any attempt by affiliated PFA(s) or employers to compromise the statutory rights of RSA holders.
PenCom also said that Employers, particularly financial institutions, are strictly prohibited from interfering with the statutory rights of their employees or that of their vendors regarding the choice of PFA and RSA Transfer.
“The Commission shall not hesitate to take appropriate regulatory and legal actions on any LPFO or employer found to contravene the above directives”.
