The National Pension Commission has warned financial institutions and employers against interfering in the choice of Pension Fund Administrators of their employees or the transfer of their Retirement Savings Accounts.
This warning was issued in a recent circular signed by the Head of the Surveillance Department, A.M. Saleem, to all licensed pension fund operators and employers.
PenCom said that it has observed the illegal and unethical practices by certain financial institutions and employers, where their employees and that of their vendors are being coerced or unduly influenced to open or transfer their Retirement Savings Accounts with specific Pension Fund Administrators, particularly those directly affiliated with the employer or indirectly through custody of their pension assets with Pension Fund Custodians.
The statement read, “This practice is unacceptable and constitutes a clear violation of the following provisions of the Pension Reform Act 2014 and relevant Regulation/Circular issued by the Commission.
“The choice of PFA and RSA transfer are the statutory rights of the RSA holders and must not, under any circumstances, be influenced by their employers or their affiliates. Any act of inducement or compulsion, whether direct or indirect, undermines the integrity of the Contributory Pension Scheme and the credibility of the RSA Transfer Process.”
The Commission therefore directed all Licensed Pension Fund Operators and employers to desist from colluding “to solicit, influence, or coerce employees to open RSAs or transfer their
accounts with a specific PFA. PFCs are reminded of their fiduciary responsibility and must report any attempt by affiliated PFA(s) or the employer to compromise the statutory rights of RSA holders.
“Employers, particularly financial institutions, are strictly prohibited from interfering with the statutory rights of their employees or those of their vendors regarding the choice of PFA and RSA transfer.”
PenCom also warned that it would impose monetary penalties and other regulatory sanctions on erring operators and suspend the RSA transfer window for the affected PFA, such that it can only participate as a transferring PFA and not a receiving PFA, and even criminally prosecuteany employer or individual infringing on employees’ statutory rights to choose their PFA or transfer their RSA, contrary to the provisions of the PRA 2014 and relevant extant subsidiary legislations issued by the Commission.
Some financial institutions operate a holding company structure with a PFA as a subsidiary.
