According to PenCom, a total of 46,198 retirees are drawing their pension benefits through life annuity product offered by insurers while 140,532 retirees are drawing through programme withdrawal offered by Pension Fund Administrators (PFAs).
Life Annuity and programme withdrawal are modes of withdrawal of benefits over an expected lifespan. The National Insurance Commission (NAICOM) and PenCom jointly regulate the life annuity business of the Pension Reform Act (PRA) 2004 repealed by the PRA 2014.
PenCom on November 3, this year directed all the insurance companies interested in administering annuity to retirees to appoint Pension Fund Custodians (PFCs) of their choice and open an account with them accordingly. This generated a backlash from insurers regulated by NAICOM as they disagree with PenCom.
PenCom explained that the decision to move annuity assets from life insurance companies to PFCs is to ensure consistency with Pension Reform Act (PRA) 2014 and strengthen the processing of administration of retirement benefits.
PenCom in a circular titled, ‘Strengthening the Administration of Retirement Benefits under the Pension Reform Act (PRA) 2014,’ with reference number PENCOM/INSP/CIR/TECH/16/17, issued on November 3, 2016, to pension fund administrators and custodians and signed by its Head, Surveillance Department, Muhammad Umar, the pension regulator noted that in line with the PRA 2014, it resolved that the custody of retiree life annuity shall henceforth be domiciled with PFCs as provided for in Section 56 of the Pension Act.
“Life insurance companies currently providing life annuity for retirees under the Contributory Pension Scheme (CPS) are to open an operational account jointly with a PFC of their choice and advise the commission. The life insurance companies providing retiree life annuity under the CPS should transfer the corresponding assets in their possession/custody to the PFC of their choice. The approval of new request for annuity should be put on hold with immediate effect, until life insurance companies meet the custody and transfer conditions.
The NIA Director-General, Sunday Thomas, who spoke at the second Business Journal Insurance Summit, in Lagos, said the body had written PenCom, National Insurance Commission (NAICOM) and the Head of Service on the need to resolve the problem.
He said PenCom lacks legal grounds to call for transfer of annuity assets, which is different from pension contributions.
He said: “We have sought the intervention of the of the National Assembly, Secretary to the Government of the Federation, Minister of Finance and the Head of Service on issue of transfer of life annuity assets as directed PenCom.
“PenCom lacks legal grounds to call for transfer of annuity assets which is different from pension contributions. I am optimistic the circular would be withdrawn by the pension regulator.”
Meanwhile, NAICOM has also sought dialogue with PenCom on its suspension of life annuity insurance payments of retirees by PFAs to insurance companies.
NAICOM’s Head of Corporate Communications, Rasaaq ‘Salami said the commission is intervening and has called for a meeting with PenCom.
“We are in receipt of a letter from PenCom on its suspension of annuity payment by PFAs to insurance companies. We have responded and stated our position and we have asked for a meeting with them. Since the meeting is a process that we have initiated, it will not be good for us to make our position known to the public. The annuity business is jointly regulated by NAICOM and PenCom and we must look for how to resolve whatever problem we encounter,” he added.
Source: The Nation