THE ROLE OF PENSION OPERATORS IN THE PROVISION OF EFFICIENT CUSTOMER SERVICE DELIVERY

THE ROLE OF PENSION OPERATORS IN

THE PROVISION OF EFFICIENT

CUSTOMER SERVICE DELIVERY

A PAPER PRESENTED BY MISBAHU YOLA (MD/CE OF LEGACY PENSION MANAGERS LTD) AT A

WORKSHOP ORGANISED BY NATIONAL PENSION COMMISSION ABUJA FOR FINANCE, INSURANCE AND

LABOUR CORRESPONDENTS

with the theme:

EFFECTIVE ADMINISTRATION OF BENEFITS UNDER THE PENSION REFORM

ACT, 2004

INTRODUCTION

DEFINING RETIREMENT

_The definition of retirement is changing, and that has caused a lot of confusion. Retirement used to be considered the end of things and the beginning of old age. Now, since we live longer and are healthier, more and more people see retirement as a great opportunity to do new things and find more meaning in their lives.

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On the practical level, retirement is the career change you make when you are no longer required to work full time and you have some freedom to choose the life that you want to live.

Retirement is a career change because it has the entire practical hallmarks of a career change, such as the need for planning, the need to learn about your own strengths and priorities, the need for networking, the change in income, the need to try out new things, and the choice of a new direction. To have a thriving retirement, you need to be doing something that you believe in and that feels important to you.

On an emotional level, retirement is a process of letting go, followed by renewal - just like a career change. The emotions you feel upon retiring are those you might feel when you start a journey to a strange country you have never visited before. You can feel scared, uncertain, and confused, but then exhilarating when you become accustomed to the new territory.

The emotional transition of retirement takes from six to more than eighteen months, and the more you know about making the transitional trip and the more you know about the new country, the better off you are.

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       Definition of terms

Pension:

A pension is a contract for a fixed sum to be paid regularly to a person, typically following retirement from service.

Post-retirement benefits that an employee might receive from some employers.

Pension Plan:

A type of retirement plan, usually tax exempt, wherein an employer makes contributions toward a pool of funds set aside for an employee's future benefits

Pension Fund:

It is a financial plan by which a worker’s benefit is provided whenever it falls due according to the policies of the plan.

When the assets in the pension fund exceed the liabilities, the fund is said to be funded in surplus, while where the liabilities exceed the assets the pension fund is said to be in deficit.

PRE PENSION REFORM ERA

Defined Benefit Scheme – Pay As You Go

_ It was operated on pay as you go basis.

_ Usually not fully funded, if at all.

_ Created huge deficits totaling over N2 trillion or 25% of GDP.

_ Retired workers were not paid as and when due.

_ Different regulators managed different schemes complicating the entire process.

_ Many offices supervising Retirement Benefit of different organisations in the Public service.

_ NSITF

PENSION REFORMACT 2004

• Contributory

o Both employer & employee to contribute (7.5% Minimum each)

• Fully Funded

o From onset, fund is set aside to fully meet future retirement benefits

• Individual Retirement Savings Accounts (RSAs)

o Personalized & portable with the aid of PIN and Biometrics

• Privately managed

o Pension Fund Administrators , Closed Pension Fund Administrators,

Pension Fund Custodians and Approved Existing Schemes

• Group life insurance cover

• Strictly regulated and supervised – National Pension Commission

• Coverage – Federal Government, State Government and Private sector employees

• Exemption – Judiciary, Military and Security Services

• Mandatory for employers with five or more employees

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PARTIES

_ Employees

_ Employers

_ Pension Fund Administrators

_ Pension Fund Custodians

_ National Pension Commission

7 ROLE OF PARTIES

Employees

_ Enrolment with a PFA of choice

_ Submission of RSA PIN to employer for onward funding of RSA.

Employers

_ Ensure employees enroll with PFAs

_ Make monthly pension remittances to PFAs

Pension Fund Administrators

Enrollments, Collections, Investment, Benefit Administration

Pension Fund Custodians

Collections, Assets custody and Benefit Administration

National Pension Commission

_ Regulate the operators, set the rules and guidelines for all aspects

_ Make remittances of some selected MDAs on behalf of the FGN

8 BENEFIT ADMINISTRATIONS

Benefits administration involves the management of employee benefits, as well as providing a means for employees to be educated in understanding how the system is structured; what is required of employees, and the types of benefits available to facilitate administration.

ROLE OF RETIREE / PROSPECTIVE RETIREE

Public sector retirees:

I. Timely attendance of verification/enrollment exercise conducted by PenCom for impending retirees of the Federal Government.

II. Employer to ensure timely submission of nominal roll to PenCom for accurate determination of employee benefits especially in cases of promotions after verification.

III. Provide PFA with copies of retirement notice and necessary documents for updating registration details and any possible change of Next of Kin.

Private Sector retirees:

I. Produce original copy of Remittance Status letter showing that all remittances have been made to the PFA and other statutory documents. 10

DOCUMENTS REQUIRED TO ACCESS BENEFITS

_ Duly completed Legacy Notice of Retirement Form

_ Duly completed Indemnity Form (Public Sector retirees only)

_ Duly completed Programmed Withdrawal Agreement Form

_ PenCom Verification Slip – for Public Sector

_ Bank Confirmation of Account

_ Declaration of Age Certificate

_ Two (2) Passport Photographs

_ Acceptance of Retirement Letter

_ Last Payslip preceding the month of retirement

_ Means of Identification

11 CUSTOMER SERVICE ISSUES

ROLE OF PFAs:

• Contact employee six months before retirement

• Notify employee of types of documentations required

• Advise retiree on various modes of withdrawal from RSA

◦ Carry out retirees instructions within the limits of guidelines

◦ Ensure accurate and prompt advice to custodian for payment to retirees

◦ Render periodic (quarterly) statements to retirees

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NORMAL BENEFITS

•Lump Sum / Programmed Withdrawal

•Annuity

•En bloc (for RSA balances below =N550,000.00)

OTHER BENEFITS

• 25 %- Temporary Access (for disengaged staff & subject to term & conditions of service)

• Death Benefits Administration / Life Insurance

FACILITATORS

• Accessibility – Offices (brick and mortar), electronic -emails, phone lines, social media

• Right people, knowledge, experienced and with empathy

• Technology- Reliable databank and quick data retrieval systems

• Strict compliance with law and guidelines

1 ROLE OF PenCom

• Provide PFAs with computation models for calculating programmed withdrawal

• For Federal Public sector workers, PenCom shall Redeem Retirement Bond as provided by the Federal Government.

• On behalf of the FGN remits outstanding contributions due to employees where applicable

• Approves ALL benefit withdrawal model/arrangements to ensure compliance with guidelines

ROLE OF PFC

• Receive lump sum (if any) and standing order instruction from PFA on the payment of periodic drawdown to a retiree

• Pay any lump sum withdrawal and periodic withdrawal as computed by PFA and approved by the Commission

• Ensure that retiree’s account is credited promptly on periodic basis as chosen by the retiree.

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CHALLENGES IN PAYMENT OF BENEFITS

_ Invalid contact address after retirement:

_ Late Verification/Enrolment with PenCom by Federal

Government employees

_ Providing conflicting documentation at PenCom

Verification/Enrolment exercise e.g.

I. Retiree’s name with PFA different from nominal payroll of MDA

II. Date of Birth at variance with retirement age

III. Date of first appointment at variance with length of service

_ Lack of/delay in submission of complete documentations

_ Delay in payment of outstanding remittances of employees by employers

CHALLENGES IN PAYMENT OF BENEFITS Contd…

Reconciliation of Retiree-RSA

_ Excesses or shortfalls must be ascertained before commencement of administration

Delay by the employer in providing the confirmation of the status of past service benefits (private sector/ self funded institutions):

_ Withholding the issuance of Retirement letter by employer

_ Lack of agreement between Retiree and PFA on amount of

lump sum and programmed withdrawal

_ Untimely submission of Letter of Administration in cases of

death benefit

_ Conflicting next of kins in cases of death benefit

REMEDIES TO AVOID DELAY IN PAYMENT OF BENEFITS

_ Valid contact details

_ Closer coordination and cooperation between employers and employees to facilitate timely remittance of accrued benefits by private employers.

_ Remittance of Retirement Bonds / Accrued Rights before due date of retirement by employers – This will ensure that

payment of monthly pension would commence immediately after the first month of retirement.

_ PFAs maintain cordial working relationship with concerned HR and pension desk officers of employers to garner information

as it concerns retirees and deceased employees.

_ PFAs employ effective resources in educating, enlightening retirees, serving employees on the processes and procedures

for processing benefits.

_ PFAs have instituted internal processes and mechanism to improve and enhance speedy payment of benefits.

REMEDIES TO AVOID DELAY IN PAYMENT OF BENEFITS

_ PFAs ensuring accurate data is maintained – educating and advising retirees and serving employees on the need and

importance to update their pension details with their PFAs on any changes that occur in their life.

_ PFAs positioning skilled and knowledgeable personnel to interact and render advice on benefits matters to retirees,

serving employees and deceased’s beneficiaries.

_ Continuous enlightenment and sensitization of HR/ pension desk personnel officers, updating them with any changes or

new development in the payment of benefits in line with PenCom Regulations and Guidelines.

_ Early release of accrued benefits and contributions by federal government and private organizations.

_ Retirees, deceased beneficiaries and PFAs ensuring that accurate and proper documents are presented for processing

of benefits payment.

CONCLUSION

Finally, the contributory pension scheme has recorded great success and more effort has to be put in place to entrench a

solid and virile pension industry where every employee trusts that the system would efficiently handle his/her benefits payment when it due.

We all have a part to play in its continued success.

THANK YOU ALL

2019