PenCom Issues Consumer Protection Framework (Part 2)

.Exploring responsibilities of pension fund operators, consumers

As reported on this page last week, the National Pension Commission (PenCom) recently issued the maiden Consumer Protection Framework for the Nigerian pension industry. Previously, we highlighted pension consumer rights and enforcement mechanisms as captured in the Framework. In this publication, we continue the discussion on the key highlights of the Framework, focusing on the responsibilities of Pension Fund Operators (PFOs) and pension consumers.

The responsible business conduct of Pension Fund Operators (PFOs) serves as the bedrock for safeguarding the rights and interests of pension consumers. The Consumer Protection Framework underscores the importance of ethical standards and professionalism in PFOs’ operations, emphasising transparency, efficiency, and consumer protection. Here is an insightful look into the key responsibilities of PFOs and the corresponding obligations of pension consumers.

Responsibilities of PFOs for effective service delivery

Effective Communication is essential in the operations of all organisations offering pension-related services. The Framework mandates all PFOs to communicate clearly and transparently with pension consumers. This includes using plain language and timely responses to consumer inquiries, ensuring that consumers receive accurate and comprehensive information regarding their pension schemes.

During the Retirement Savings Account (RSA) registration process, Pension Fund Administrators (PFAs) are required to provide clear and precise information to prospective contributors, explaining all aspects of the pension scheme, including contributions, benefits, and investment Fund options. Transparency is crucial to fostering consumer trust. Since pension consumers are entitled to transfer their RSAs from one PFA to another once a year, an acceptable market conduct entails PFAs recognising that transparency and fairness are paramount in the transfer processes. PFAs are required to facilitate transfers in good faith, respecting consumers’ choices without coercion or inducement.

In investing pension funds, PFAshave a fiduciary duty to act in consumers’ best interests by prioritising fund safety, security, and growth while managing risks prudently. They must make informed investment decisions aligned with regulatory guidelines. Best practice entails that PFAs exercise due diligence, implement robust risk management practices to protect pension funds against potential risks and make informed investment decisions that aim to maximize returns within acceptable risk parameters.

To render outstanding service and protect pension consumer rights, PFAs are responsible for timely and accurate disbursement of pension benefits, ensuring retirees understand their benefit payment options (Programmed Withdrawal and Retiree Life Annuity) and eligibility criteria for various benefit types. PFAs shall provide comprehensive educational materials to help consumers make informed decisions about the modes of receiving their periodic retirement benefits most suitable to them.

Pension Consumers’ Responsibilities

To help Pension Fund Operators serve them better, pension consumers also bear responsibilities crucial to the efficacy and integrity of the pension system. While PenCom and PFOs strive to protect the rights of pension consumers and ensure that they receive quality service, RSA holders are also expected to play significant roles in all the processes.

First, pension consumers must furnish accurate details to PFOs, avoiding misinformation or omission that could impact their pension benefits. It is essential for consumers to read and comprehend all materials provided by PFOs to make informed decisions about their pension and retirement planning. Consumers should ensure all mandatory fields in forms are filled accurately before appending their signatures. Conducting due diligence on documents helps to prevent errors or misunderstandings. RSA holders are required to keep all records of pension-related documents to ensure accountability and transparency. The Framework requires pension consumers to use correct mailing addresses and phone numbers to facilitate effective communication with PFAs.

Essentially, for clarity and avoidance of mistakes, pension consumers should seek clarification on any unclear terms or conditions related to Contributory Pension Scheme (CPS). Consumers should not hesitate to engage PFOs to address any challenges or uncertainties they encounter.

Furthermore, pension consumers are required to imbibe the practice of safeguarding personal information about their RSAs.The confidentiality of Personal Identification Numbers (PINs) and other personal details protects against fraud and unauthorised access. RSA holders are required to regularly update their personal details with PFAs to ensure accurate account management. Accordingly, PenCom has mandated RSA holders who enrolled in the CPS on or before July 1, 2019, to participate in the Data Recapture Exercise (DRE). This exercise, which covers active and retired RSA holders, was necessitated by the need to collect and maintain current, comprehensive, and accurate data of RSA holders.

It is imperative for pension consumers know how to escalate complaints and concerns to ensure timely resolution of issues affecting pension accounts. The Framework requires RSA holders to promptly report any unauthorised transactions to PFAs and, where necessary, escalate further to PenCom for resolution. It is noteworthy that promptly reporting unethical practices or fraud contributes to a more transparent pension system.

In conclusion, the success of Nigeria’s pension sector hinges on the responsible conduct of both PFOs and pension consumers. By upholding ethical standards, transparency, and effective communication, PFOs can build consumer trust and ensure the integrity of pension operations. Likewise, informed, and proactive consumer behaviour strengthens the overall resilience and efficiency of the pension industry, safeguarding the retirement future of millions of Nigerians. In the next publication, we will continue our presentation on the key highlights of the Consumer Protect Framework.