Revised Regulation on the Administration of Retirement and Terminal Benefits

The National Pension Commission (PenCom or “the Commission”) recently issued a Revised Regulation on the Administration of Retirement and Terminal Benefits (“the Revised Regulation”). The Revised Regulation replaced the erstwhile Regulations for the Administration of Retirement and Terminal Benefits under the repealed Pension Reform Act (PRA), 2004, and sets out the procedures for application of the relevant sections of the PRA, 2014 to be adopted by Pension Fund operators for the administration of retirement and terminal benefits under the Contributory Pension Scheme (CPS).

We have highlighted below some of the significant provisions in the Revised Regulation:

The Revised Regulation covers Retirement Savings Account (RSA) holders and/ or beneficiaries who are employees in the private and public sectors, the Federal Capital Territory, and States and Local Governments that have adopted the CPS. It provides the framework for the administration of benefits, including documentation, consolidation of funds in the RSA and payment under the different modes of benefits payment. The Revised Regulation also defines terms not interpreted under Section 120 of the PRA such as benefits withdrawal, death benefits, enbloc payment, mandatory retirement, etc., and expanded the definitions of some terms already included in the PRA, including annual total emolument, employer, pension fund custodian and retirement savings account.

Although the definitions are meant to provide clarifications on the relevant terms, it must be noted that the Revised Regulation cannot amend, replace, or vary the PRA which is an Act of the National Assembly. Therefore, the interpretation of terms in the PRA supersedes identical terms defined in the Revised Regulation.

The Revised Regulation provides guidelines for accessing retirement benefits by an employee/ retiree on grounds of mandatory retirement, compulsory retirement, retirement on medical grounds and temporary loss of employment/ disengagement. Particularly, Paragraph 2.1 of the Revised Regulation mandates Pension Fund Administrators (PFAs) to contact retiring employees not less than four (4) months to retirement and ensure that the retirees are acquainted with the CPS Retirement Pack at least three (3) months to the date of retirement. This is in addition to the existing requirement for RSA holders to notify the PFA of the impending retirement.

In line with the PRA, the Revised Regulation provides that retirees may only access their retirement benefits upon consolidation of their RSA, which consists of accrued pension rights or pre-Act benefits (for employees that were in employment before the commencement of the CPS in 2004), employer/ employee pension contributions, returns on investment, and the fixed portion of voluntary contributions. PFAs are also required to liaise with employers and other relevant parties to ensure that all entitlements of a retiree or deceased person are accounted for during consolidation of the RSA. Further, the Commission mandates that requests for retirement benefits must be finalized within six (6) working days from completion of documentation, with two (2) working days each assigned to PFAs for submission of completed documentation, approval and/or rejection of the PFAs request by the Commission, and payment of retirement benefits to the RSA holder by the PFA.

The Revised Regulations further specifies the returns to be rendered on PenCom’s Risk Management Analysis System by PFAs and Pension Fund Contributors (PFCs).

We commend PenCom for the publication of its Revised Regulation which highlights the Commission’s plan for a better structured retirement benefit system. The Revised Regulation clearly outlines procedures for accessing RSA funds pursuant to the provisions of the PRA 2014, and emphasizes the Commission’s commitment to upholding the rights of RSA holders through improved documentation requirements and introduction of steep penalties for defaulting PFAs.

It is hoped that eligible retirees will, in practice, have a seamless access to their retirement benefits as intended by the Revised Regulation.

Please click here to read the Revised Regulation.

The National Pension Commission (PenCom or “the Commission”) recently issued a Revised Regulation on the Administration of Retirement and Terminal Benefits (“the Revised Regulation”). The Revised Regulation replaced the erstwhile Regulations for the Administration of Retirement and Terminal Benefits under the repealed Pension Reform Act (PRA), 2004, and sets out the procedures for application of the relevant sections of the PRA, 2014 to be adopted by Pension Fund operators for the administration of retirement and terminal benefits under the Contributory Pension Scheme (CPS).

We have highlighted below some of the significant provisions in the Revised Regulation:

The Revised Regulation covers Retirement Savings Account (RSA) holders and/ or beneficiaries who are employees in the private and public sectors, the Federal Capital Territory, and States and Local Governments that have adopted the CPS. It provides the framework for the administration of benefits, including documentation, consolidation of funds in the RSA and payment under the different modes of benefits payment. The Revised Regulation also defines terms not interpreted under Section 120 of the PRA such as benefits withdrawal, death benefits, enbloc payment, mandatory retirement, etc., and expanded the definitions of some terms already included in the PRA, including annual total emolument, employer, pension fund custodian and retirement savings account.

Although the definitions are meant to provide clarifications on the relevant terms, it must be noted that the Revised Regulation cannot amend, replace, or vary the PRA which is an Act of the National Assembly. Therefore, the interpretation of terms in the PRA supersedes identical terms defined in the Revised Regulation.

Click here to read more on this publication.