RSA transfers drive competition, innovation in Nigeria’s pension sector

Joy Agwunobi 

The introduction of the Retirement Savings Account (RSA) transfer system has ushered in a new era of competition among Pension Fund Administrators (PFAs) in Nigeria, compelling them to enhance their services to attract and retain contributors.

This development is steadily transforming the pension sector, as contributors are increasingly leveraging the freedom to switch PFAs for better service delivery. Over the past 16 quarters, approximately 312,771 RSA holders have transferred a cumulative total of N1.41 trillion between PFAs, according to data from the National Pension Commission (PenCom).

In 2024, the volume of transferred assets saw a marked increase, with PenCom’s data showcasing steady growth. During the first quarter, 22,927 RSA holders moved N120.87 billion. This upward trend continued into the second quarter, with 20,993 holders transferring N128.87 billion. By the third quarter, the value of transferred assets climbed to N141.87 billion, bringing the total for the first three quarters of the year to N391.60 billion from 67,146 RSA holders.

The RSA transfer process is streamlined to ensure convenience and security. According to the commission, rather than visiting their current PFA (Transferring PFA), the RSA holder should approach the PFA they intend to transfer to (Receiving PFA) and provide their RSA PIN, surname, current telephone number and email address. The Receiving PFA will validate the biodata of the RSA holder requesting a transfer. Thereafter, the RSA holder’s fingerprint will be captured to authenticate their identity as the final step to conclude the transfer request. The Receiving PFA prints two copies of a confirmation slip, which the RSA holder should sign as proof that they initiated the transfer; finally, the PFA retains a copy of the confirmation slip while a copy is given to the RSA holder.

This system, regulated under Section 13 of the Pension Reform Act 2014, allows RSA holders to transfer their accounts once a year, balancing flexibility with operational orderliness.

The competitive environment driven by the RSA transfer system has had a ripple effect on the broader pension sector. PFAs are now incentivised to deliver superior services, fostering innovation and efficiency across the industry. As a result, total pension fund assets under the Contributory Pension Scheme have surged to N21.92 trillion as of October 2024, supported by contributions from over 10.53 million registered participants.

Omolola Oloworaran, PenCom’s director-general, had projected that pension assets will exceed N22 trillion by year-end, a milestone underscoring the Commission’s commitment to prudent fund management and sustainable growth.

However, Oloworaran highlighted that 2024 presented significant economic challenges including rising inflation, naira devaluation, and the lingering effects of unorthodox monetary policies that have eroded the real value of pension funds, impacting contributors’ purchasing power.

In response, PenCom has undertaken a comprehensive review of its investment regulations. The review focuses on diversifying pension fund investments into areas that offer inflation protection and growth opportunities, including alternative assets and foreign currency-denominated investments. According to Oloworaran, this approach aims to safeguard contributors’ funds while preserving their real value in the face of economic pressures.