Nigeria’s insurance industry appear helpless and frustrated following a recent circular by the National Pension Commission, PenCom, directing that the custody of retiree life annuity shall henceforth, be domiciled with Pension Funds Custodians PFCs as provided for in Section 56 of the Pension Act.
In a circular with the title; Strengthening the Administration of Retirement Benefits under the Pension Reform Act (PRA) 2014, with reference number PENCOM/INSP/CIR/TECH/16/17, issued on November 3, 2016, to pension fund administrators and Custodians and endorsed by the Commissions Head, Surveillance Department, Muhammad Umar, the agency directed all the insurance companies interested in administering annuity to retirees to appoint Pension Fund Custodian (PFC) of their choice and open an account with them accordingly..
The PenCom in the circular insists that Life insurance companies currently providing life annuity for retirees under the Contributory Pension Scheme, CPS, should open an operational account jointly with a PFC of their choice and advice the commission.
The life insurance companies’ currently providing retiree life annuity under the CPS should transfer the corresponding assets in their possession/custody to the PFC of their choice, PenCom says.
Also, the PenCom said that the approval of new request for annuity should be kept in abeyance, until life insurance companies meet the custody and transfer conditions.
The decision to move annuity assets from life insurance companies to PFCs, according to PenCom is to ensure consistency with Pension Reform Act (PRA) 2014 and strengthen the processing of administration of retirement benefits.
It disclosed that a total of 46,198 retirees are currently drawing their pension benefits through life annuity product offered by insurers while 140,532 retirees are drawing through programme withdrawal offered by Pension Fund Administrators (PFAs).
Life Annuity and Programme Withdrawal are modes of withdrawal of benefits over an expected lifespan.
However, in their latest battle to save their business, Life insurance firms under the umbrella body of the Nigerian Insurers Association, NIA, have sent SOS to the National Assembly, Secretary of the Federal Government, the Minister of Finance and the Head of Service on the issue.
Also, the NIA Director-General, Sunday Thomas, who commented on the issue at the 2nd Business Journal Insurance Summit 2016, in Lagos said NIA has written PenCom, National Insurance Commission (NAICOM) and the Head of Service on the need to resolve the problem.
Thomas argues that PenCom lacks legal grounds in law to call for transfer of annuity assets which is different from pension contributions.
According to him, We have sought the intervention of the of the National Assembly, Secretary of the Federal Government, Minister of Finance and the Head of Service on issue of transfer of life annuity assets as directed PenCom.
PenCom lacks legal grounds to call for transfer of annuity assets which is different from pension contributions. I am optiimistic the circular would be withdrawn by the pension regulator.”
Meanwhile, the National Insurance Commission, NAICOM has sought for a meeting with PenCom on its suspension of life annuity insurance payments of retirees by PFAs to insurance companies.
NAICOM’s Head of Corporate Communications, Rasaaq ‘Salami said the Commission is intervening and has called for a meeting with PenCom.
“We are in receipt of a letter from PenCom on its suspension of annuity payment by PFAs to insurance companies. We have responded and stated our position and we have asked for a meeting with them.
Since the meeting is a process that we have initiated, it will not be good for us to make our position known to the public.
The annuity business is jointly regulated by NAICOM and PenCom and we must look for how to resolve whatever problem we encounter”, he added.
The NAICOM and PenCom jointly regulates the life annuity business of the Pension Reform Act (PRA) 2004 repealed by the PRA 2014.