Pension Insight: How to apply for the 2024 pension clearance certificate

The National Pension Commission (PenCom) issued pension clearance certificates (PCCs) to 30,293 organisations that applied and were confirmed to have complied with the laid down requirements of the contributory pension scheme (CPS) in 2023. An analysis revealed that there was an increase of 3,737 from the 26,556 organisations that obtained the certificate in 2022.

However, it is imperative to note that the PCC is valid up to 31 December of the year it was obtained, irrespective of the date it was issued within the year. Consequently, all 30,293 PCCs have expired on 31 December 2023. Therefore, organisations are required to apply for new PCCs for the year 2024.

PenCom commenced the issuance of PCC to organisations in 2012 in line with the Pension Reform Act, 2014 (PRA, 2014), which mandates all organisations with at least three employees to participate in the CPS.

The PCC is evidence of compliance with the PRA 2014 and serves as a prerequisite for all suppliers, contractors, or consultants soliciting any contract or business from the federal government’s ministries, departments, and agencies (MDAs). Accordingly, PenCom issues PCCs to organisations that apply and have fully complied with the requirements.

In order to qualify for a PCC, the employer must ensure that its employees open retirement savings accounts (RSAs) with any pension fund administrator (PFA) of their choice. Employers must also remit the employer and employee monthly pension contributions to the pension fund custodians (PFCs) no later than seven working days from the payment date of salaries.

Furthermore, employers with pension schemes which existed before the CPS must transfer pension funds and assets in their custody to licensed pension operators. Finally, employers must provide their staff with a group life insurance policy (GLI) covering at least three times the annual total emoluments of the employees.

REQUIREMENTS FOR THE PCC

Employers wishing to obtain a pension clearance certificate are required to submit their application with the following documents:

1. Certified list of employees of the organisation as at the end of the last fiscal year. The certification should be done with an authorised official stamp of the applicant organisation.
2. Certified rate of monthly pension contributions (specifying employer and employee rates). The rates relating to the monthly emoluments are:
3. (a) Minimum of ten percent (10%) by the employer; and
4. (b) Minimum of eight percent (8%) by the employee.

Evidence of remittance of monthly pension contributions for all employees as follows:

1. For the last three fiscal years for organisations that were in existence for that period and have three or more staff;
2. For organisations that have not been in existence for the last three fiscal years, from the date of incorporation/registration/licensing to the last fiscal year.
3. Evidence of remittance of all outstanding pension contributions and penalties (for late remittance).
4. Evidence of transfer of pension fund and assets held prior to the commencement of the contributory pension scheme (CPS) to a licensed pension fund operator. This is only applicable to organisations that had pension arrangements or were in custody of pension assets before June 2004.
5. Evidence of current group life insurance policy procured for the staff of the organisation specifying the number of employees covered and the sum assured.

 ISSUES TO NOTE IN THE APPLICATION FOR PCC

The processing of PCC applications as designed by PenCom is straightforward and transparent. Applications are processed within seven working days, provided that all requirements are met and requested documents are provided.

Some of the noted deficiencies in the submissions by organisations include the following: under-remittance of contributions; non-provision of group life insurance for at least three times the total annual emolument of employees; understating the number of employees and remittance of outstanding pension contributions.

In the event of any deficiency, a notification is forwarded to the applicant for remedial action before the issuance of the PCC. PenCom, in a general notice to all employers published in September 2023, warned employers against using third parties to get the PCC, as employers are encouraged to apply directly to avoid any hitches.

It is important to emphasise that the PCC is issued to the applicant organisation at no cost. PenCom is not paid any amount whatsoever. The employer is only required to remit employee pension contributions into their RSAs.

A list of organisations that were issued the PCC is uploaded on the PenCom website to facilitate verification by interested parties. Consequently, any certificate not found on the website is invalid, as the list is updated daily.

There is also an interface through which the Bureau of Public Procurement (BPP) verifies the PCCs of organisations as PenCom feeds BPP the information daily.

The 30,293 organisations that were issued PCCs in 2023 remitted about N148.24 billion for their employees. Since introducing the pension clearance certificate in 2012, PenCom has observed increasing compliance with the CPS by the private sector.