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The death or closure of any PFA, if it happens, poses no security risk to the RSA balance of a contributor

The National Pension Commission (PenCom), on April 27, 2021, gave Pension Fund Administrators (PFAs) 12 months to increase their share capital from N1 billion to N5 billion.

The deadline ended on Wednesday, and there was no sign at the time of filing this report that PenCom would extend it.

Although the exact number of PFAs that met the deadline was still unknown as of Wednesday, PenCom had hinted that over 50 percent had crossed the hurdle as at end of last year, while about six mergers and acquisitions emerged.

However, what is occupying the minds of some pension contributors is a question of what would happen to their funds if their PFAs fail to recapitalise.

The regulator, PenCom, has several options to manage this situation. It could force PFAs that did not recapitalise to merge operations, withdraw their operational licences, or extend the deadline.

Whatever the decision of the regulator, the important thing to note is that contributors’ funds are domiciled in their personal Retirement Savings Account (RSA), managed by the PFAs and invested through the Pension Fund Custodians, who in turn place these funds in different asset classes, as provided in the investment guideline issued by PenCom.

The funds are therefore safe and secure, as only the RSA holder, that is the contributor, has the right to access the funds at retirement or when the need arises, with the approval of PenCom.

However, if a PFA fails to recapitalise and its operational licence is withdrawn by PenCom, the RSA holder can explore the option of transfer window to move his or her funds in the RSA to other PFAs of their choice, as provided by the Pension Reform Act 2014.

RSA Transfer is the transfer of an individual’s RSA from one PFA to another, processed through the RSA Transfer System.

Therefore, the death or closure of any PFA, if it happens, poses no security risk to the RSA balance of a contributor.

The objective of the Contributory Pension Scheme is to ensure that every person who works in either the public or private sector in Nigeria as well as the self-employed persons, receives his/her retirement benefits as and when due.