PenCom Issues Consumer Protection Framework (Part 3)

…Consumer pension assets, data and privacy protected

As previously reported, the National Pension Commission (PenCom) issued a Consumer Protection Framework for Nigeria’s pension industry, outlining pension consumer rights and responsibilities. The framework specifies the responsible business conduct of Pension Fund Operators (PFOs), as well as dispute resolution and enforcement mechanisms.

In this publication, we discuss the framework’s key highlights, focusing on the protection of consumer pension assets, data, and privacy. The framework mandates robust data protection measures, promotes healthy competition, and enforces ethical advertising practices within the pension industry. This comprehensive approach aims to foster a transparent, secure, and consumer-friendly environment, empowering consumers to make informed decisions about their retirement savings.

Protection of Consumer Pension Assets, Data, and Privacy

The separation of management and custody of pension funds between Pension Fund Administrators (PFAs) and Pension Fund Custodians (PFCs) ensures that consumers’ pension funds are safeguarded. All PFAs must comply with the regulation on Investment of Pension Fund Assets issued by PenCom, which is periodically updated to minimise investment risk exposure.

Consumers’ pension and personal information are protected by PFOs. This is not released to third parties without the consumer’s consent, except as required by relevant laws. In terms of data usage consent, PFOs are obligated to maintain the confidentiality of consumers’ personal information and ensure data privacy and security. They must obtain prior consent from Retirement Savings Account (RSA) holders before using their information for promotional offers via email, SMS, phone calls, and other channels. Furthermore, PFOs must ensure the privacy and security of consumers’ data when requests are made by third parties, including government agencies.

Appropriate data protection safeguards and security measures, including employee training, must be in place to prevent unauthorised access, alteration, disclosure, accidental loss, or destruction of consumers’ data. To ensure data security and access control, PFOs must implement policies and controls to protect consumers against fraud. These policies include the use of robust software and transaction monitoring systems. For example, segregation of duties ensures that no single individual can both initiate and complete a transaction. PFAs have established access control systems to restrict and monitor access to consumer databases, ensuring that consumers’ data are securely stored and accessed only by authorised personnel. Periodic audits of control systems are required to ensure their adequacy and effectiveness in preventing breaches. When engaging with third-party agents, PFOs prioritise the safety and security of consumers’ data, allowing the use of consumer data solely for the specific requested purpose.

Competition and Free Market

Promoting competitive markets is essential to providing consumers with a wide range of choices among PFAs and encouraging the offering of diverse pension-related products within the boundaries set by the Pension Reform Act (PRA) 2014. This approach fosters innovation and helps drive high service quality within the pension industry. Consequently, consumers should be able to search, compare, and switch between products and service providers to make informed decisions that best suit their needs.

Pension consumers have the option to move their RSAs from one PFA to another, choose a mode of withdrawing retirement benefits, and select their preferred investment fund within the scope of the PRA 2014. Encouraging a free-market environment is vital for effective service delivery. Therefore, PFOs are required to promote healthy competition while refraining from unethical and de-marketing practices, ensuring fair and beneficial outcomes for all consumers. Engaging in practices that tarnish the image or services of competitors is strictly prohibited.

For fair play, PenCom ensures that PFO advertisements align with approved product features. Advertisements must not mislead, misrepresent, or exaggerate the benefits of products and services. All advertisements should disclose full information about the products and services being advertised in clear and explicit language. When promotional materials refer to rates of return, PFOs must indicate all applicable charges and state the features of the products/services.

In conclusion, the Consumer Protection Framework plays a crucial role in safeguarding consumer pension assets, data, and privacy. By enforcing strict regulations on PFOs regarding the management, investment, and confidentiality of pension funds and personal data, PenCom ensures that consumers’ interests are prioritised and protected. In Part 4, we will conclude our presentation on the key highlights of the Consumer Protection Framework.