The National Pension Commission (PenCom) has barred Pension Fund Administrators (PFAs) from sending gifts to Retirement Savings Account (RSA) holders.
This may not be unconnected to a series of complaints from several quarters against such practice and the need to discourage unhealthy competition among the PFAs.
According to Punch, this order was given by PenCom in a new directive to the PFAs by PenCom, who acknowledged that the practice was getting out of hand.
PenCom noticed an alarming increase in sending of gifts by PFAs
The PFAs often sent birthday gifts to workers nearing retirement to encourage them to stay even till after retirement as well as sent out corporate gifts to many of their RSA holders and clients at the end of the year.
The pension regulator, however, noticed that since the introduction of the window of transfer which allowed pension contributors to change their PFAs, there has been an alarming increase in the rate at which the PFAs sent gifts to many RSA holders, including the younger ones.
It was discovered that the practice of sending these gifts was to discourage them from transferring their pensions to other PFAs.
At retirement forums, the PFAs had, over the years, continued their culture of giving gifts to their retirees. However, there are fears that this may stop if PenCom does not reverse its decision.
According to reports, Stanbic IBTC Pension Managers Limited had in a mail to some of its RSA holders informed them of the directive by PenCom to immediately stop the distribution of gifts to them.
The mail reads, “Congratulations on your upcoming birthday celebration!
“This is to inform you that we are in receipt of a new directive from the National Pension Commission, advising the immediate discontinuation of the distribution of gifts by all Pension Fund Administrators to Retirement Savings Account holders.
“As a result, we are engaging the commission for clarity on the instruction and once confirmation is received to proceed, your gift will be delivered to your preferred address.
“We sincerely apologise for any inconvenience which may result from this new development. We would, however, like to reassure you of the high value we place on our clients. Our commitment to providing you with excellent services remains unwavering, while our pledge to client obsession remains unchanged.”
PenCom confirms the directive
The Spokesperson of PenCom, Abdulqadir Dahiru, also confirmed the development saying that the commission is trying to sanitize the industry.
He said, “The commission released a circular stopping all these ‘gifting things’ because it was getting out of hand and we were getting a lot of complaints so the commission had to put a stop to it. With the transfer window, it was becoming alarming.”
He noted that the PFAs were not really making much except the fees charged on the funds they were managing because the funds were in the custody of the Pension Fund Custodians.
Dahiru said, “When you start spending on all these, where is that money going to come out from? We don’t want unhealthy competition in our industry. It is an attempt to sanitise the industry.”
He however said engagements were still on-going in that regard.
What you should know
In another development, PenCom had some days ago announced the final approval for pension contributors in active employment to use 25% of the balance of their Retirement Savings Account (RSA) to pay for equity contribution for mortgage.
The commission said the approval was in line with Section 89 (2) of the Pension Reform Act 2014 (PRA 2014), which allowed RSA holders to use a portion of their RSA balance toward the payment of equity for residential mortgage.