PFAs fiduciary duties
By Patience Ikpeme
Investments that licensed Pension Fund Administrators are managing are ‘ring-fenced’ for the benefit of Retirement Savings Account (RSA) holders and other pension beneficiaries.
This information is detailed in a report titled “The Fiduciary Role of Pension Fund Administrators Under the Contributory Pension Scheme (CPS),” which was obtained by The Nation.
Mrs. Aisha Dahir-Umar, the Director-General of the National Pension Commission (PenCom), highlighted that the Pension Reform Act (PRA) of 2014 has provisions in place to prevent conflicts of interest when it comes to pension fund investments.
She emphasized that PenCom’s diligent enforcement of the Act has led to the accumulation of pension fund assets exceeding N17.07 trillion as of July 31 this year.
Furthermore, she stressed that PFAs shoulder a significant responsibility in managing pension assets on behalf of contributors, in line with Section 69(b) of the PRA 2014.
This section mandates PFAs and Pension Fund Custodians (PFCs) to ensure that pension funds’ management and custody prioritize the best interests of RSA holders.
The CPS is often referred to as fully-funded due to individual Retirement Savings Accounts (RSAs) where monthly contributions are deposited and managed as investments in various instruments.
The overarching goal of pension fund investments is to guarantee timely retirement benefits, with a focus on safety and reasonable returns. PenCom has issued regulations, known as the Investment Regulation, to govern these investments.
PFAs are responsible for making investment decisions while ensuring safety and returns, while PFCs ensure the secure custody of assets. These investment decisions are made as a fiduciary duty, guided by the Investment Regulation and on behalf of pension contributors.
It is important to note that pension funds are distinct from a PFA’s own assets and exist exclusively for the benefit of pension contributors. Section 86 of the PRA 2014 outlines the permitted investment options, which include government bonds, treasury bills, corporate debt instruments, and listed public company shares, among others.
The Investment Regulation also addresses conflicts of interest, prohibiting PFAs and their agents from investing pension fund assets in securities issued by related parties or individuals. The definition of related persons or parties encompasses various relationships, as outlined in Section 1.10 of the Investment Regulation.
In conclusion, PenCom closely monitors PFAs to ensure compliance with the Investment Regulation, and PFAs are required to provide daily valuation reports on pension fund investments, ensuring strict adherence to the regulations.
