The National Pension Commission (PenCom) has issued a stern warning to employers and Pension Fund Administrators (PFAs) against influencing the decisions of employees and vendors regarding the opening or transfer of Retirement Savings Accounts (RSAs).
In a regulatory notice published on its website and signed by A.M. Saleem, head of the surveillance department, PenCom expressed concern over rising incidences of unethical practices in the pension industry, particularly the coercion of employees to open or transfer RSAs to specific PFAs—often those affiliated with their employers or associated Pension Fund Custodians (PFCs).
“The National Pension Commission (the Commission) has observed with concern 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 (RSAs) with specific Pension Fund Administrators (PFAs), particularly those directly affiliated with the employer or indirectly through custody of their pension assets with Pension Fund Custodians (PFCs),” the Commission stated in the notice.
PenCom described such practices as unacceptable and in clear violation of the Pension Reform Act (PRA) 2014 and several circulars issued by the Commission to protect the rights of employees under the Contributory Pension Scheme.
Quoting specific legal provisions, PenCom emphasised that Section 11(1) of the PRA 2014 gives every eligible employee the right to maintain an RSA in their own name with any PFA of their choice.
Similarly, Section 13 of the same Act provides that RSA holders may transfer their accounts from one PFA to another, no more than once a year, in line with the Commission’s issued guidelines.
The Commission also referenced Section 2.3 of its August 14, 2020 circular (Ref: PENCOM/INSP/CIR/SURV/20/131) on RSA Transfers, which explicitly prohibits any form of employer interference in employees’ selection of PFAs.
“The choice of PFA and RSA Transfer are the statutory rights of the RSA holders and must not, under any circumstance, be influenced by their employers or their affiliates,” PenCom stressed, adding that any form of inducement or compulsion whether direct or indirect—undermines both the integrity of the pension system and the credibility of the RSA transfer process.
As part of its regulatory response, the Commission issued a series of warnings and directives to all Licensed Pension Fund Operators (LPFOs) and employers. These include a strict prohibition on any form of collusion between LPFOs and employers to solicit or pressure employees into opening RSAs or transferring accounts to designated PFAs.
PenCom further reminded Pension Fund Custodians of their fiduciary duties, urging them to promptly report any attempts by affiliated PFAs or employers to violate employees’ statutory pension rights.
The Commission also cautioned employers particularly in the financial services sector;against any interference with the pension choices of their staff or vendors. Such interference, PenCom said, constitutes a breach of legal and regulatory obligations under the PRA 2014.
In warning of consequences for violations, the Commission outlined its readiness to impose appropriate sanctions on offending institutions or individuals. These may include monetary penalties, regulatory sanctions under the Commission’s extant Regime of Sanctions and Penalties, and suspension of the RSA transfer window for any PFA found culpable—limiting such PFA to only transferring out accounts rather than receiving them.
PenCom also indicated that criminal prosecution may be pursued against any employer or individual who infringes upon employees’ rights to choose or transfer their PFA, in contravention of the PRA 2014 and related regulations issued by the Commission.
