7 Important Roles of a Pension Fund Administrator (PFA) All Employees Must Know
The Contributory Pension Scheme (CPS) which started over seventeen years ago has witnessed significant progress. This is all thanks to the essential systems that make up its foundation.
A major aspect of this scheme is isolating the management of pension funds from the custody of pension funds. Now, we have Pension Fund Administrators (PFAs) that are responsible for managing pension funds. And we also have Pension Fund Custodians (PFCs) that are responsible for the custody of the funds.
These Pension Fund Operators are licensed, supervised and regulated by the National Pension Commission (PenCom). As a pension contributor, it is your right to know the roles of PFAs under the Contributory Pension Scheme (CPS).
Here are the seven important roles of a Pension Fund Administrator (PFA).
Registration of Contributors
As an employee, the PFA is responsible for opening a Retirement Savings Account (RSA) for you. After you have completed your RSA registration form and supplied other necessary documentation, you will receive a Personal Identification Number (PIN).
Most importantly, you have the exclusive right to choose a PFA as an employee.
Crediting of individual RSAs
PFAs are responsible for crediting RSAs with monthly pension contributions. The monthly pension contributions are deducted by the employer and remitted to the Pension Fund Custodian (PFC) with an accompanying schedule that contains the names, RSA PINS and other details of the employees. The PFC in turn advises the PFA upon receiving the schedules.
Taking Investment decisions
The pension contributions in individual RSAs are pooled together by the PFA into a Fund that is invested in various allowable asset classes.
The PFA is responsible for making investment decisions to ensure safety and fair returns for the benefit of contributors. These investment decisions must be by the Investment Regulations issued by PenCom.
All incomes earned are exclusively for the benefit of contributors. Consequently, the PFA exercises investment decisions on trust, as a fiduciary duty on behalf of contributors.
Payment of Retirement benefits
The main objective of the CPS is to ensure the payment of retirement benefits as and when due.
The PFA is therefore responsible for processing the retirement benefits of a retiree under the CPS. This includes ensuring the retiree provides all required documentation at least six months before retirement.
The PFA is also responsible for obtaining necessary approvals from PenCom and issuance of instructions to the PFC for payment of retirement benefits.
Provide Customer Support to RSA holders
The PFA provides various customer support services to the RSA holders, including issuing RSA statements at least once every quarter.
In carrying out this function, PenCom ensures that PFAs have an adequate number of branches to serve locations where they have a significant number of registered RSAs under their management.
In addition, PFAs are also expected to have the necessary technology that widens access to their services for RSA holders.
Render Returns to PenCom
PFAs maintain proper books of account and render off-site returns to PenCom. The off-site returns assist PenCom inadequately supervising the PFAs.
The returns include the daily valuation reports on investment, and monthly and quarterly returns on various aspects of PFAs’ operations, among others.
In addition to the off-site reviews, PenCom conducts routine on-site examinations annually and special examinations whenever the need arises.
Appointment of Pension Fund Custodian (PFC)
As noted earlier, the management and custody of pension funds are carried out by the PFA and PFC respectively. It is, therefore, the PFA’s responsibility to appoint a Licensed PFC to provide custody and safekeeping for the pension funds under its management.
The PFC is responsible for executing all transactions as instructed by the PFA, provided that such is in line with the Investment Regulations issued by PenCom.
The PFAs are licensed by PenCom after satisfying rigorous licensing criteria. Currently, there are 20 PFAs managing pension fund assets on behalf of RSA holders.
Oak Pensions is one of the Pension Fund Administrators. It is set up under the new Pension Reform Act 2014. At Oak Pensions, we apply modern information technology for the management, operation and investment of pension funds to yield maximum returns for contributors.