Pension Insight: PenCom issues consumer protection framework (part 1)

An essential feature of the contributory pension scheme (CPS) is the involvement of active contributors and retirees in critical decision-making for their pension savings.

Retirement savings account (RSA) holders play an active role within the CPS, having defined rights such as selecting a pension fund administrator (PFA), choosing the type of investment fund for their pension contributions, and determining the mode of pension payment upon retirement.

Since its inception, the National Pension Commission (PenCom) has continuously refined strategies to safeguard pension consumers’ rights and ensure exceptional service delivery. In April 2017, PenCom issued a circular on service delivery by PFAs, emphasising RSA holders’ entitlement to quality services.

The importance of outstanding service and protecting pension consumer rights was further underscored in the Code of Ethics and Business Practices for Licensed Pension Operators introduced in 2017. Furthermore, PenCom issued a circular in August 2023, concerning the operations of branch offices and service centres by PFAs. The aim was to expand the reach of PFAs and enhance service quality for RSA holders.

Continuing its commitment to protecting pension consumer rights and enhancing service standards, PenCom issued the inaugural Consumer Protection Framework in April 2024 for the pension industry. This framework is designed to ensure exceptional service delivery from both PenCom and licensed pension fund operators (LPFOs). Over this four-part series, we will explore the key aspects of the framework. Part 1 delves into pension consumer rights, and enforcement mechanisms.

As a precursor to issuing the framework, PenCom established the consumer protection department (CPD) as part of its refreshed corporate strategy, aimed at enhancing consumer confidence, a critical element in fostering a robust and sustainable pension industry. The CPD focuses on monitoring and ensuring compliance with the rights of contributors and retirees, as well as handling complaints related to the CPS.

The consumer protection framework is essential to achieving the high service delivery standards within the pension industry, setting forth guiding principles to meet consumer expectations.

OBJECTIVES OF THE FRAMEWORK

The primary objective of the framework is to boost consumer confidence, thereby ensuring the stability and sustainability of Nigeria’s pension industry. Specific objectives include effectively managing pension funds to provide sustainable retirement income, promoting transparency and accountability in pension management, ensuring fair treatment of consumers, facilitating consumer access to information for informed decision-making, promoting professionalism and ethics, and expeditiously handling complaints and resolving disputes.

The consumer protection framework is applicable to all organisations that render pension-related services, including but not limited to the PFAs, pension fund custodians (PFCs) and closed pension fund administrators (CPFAs). This wide-ranging framework is informed by international best practices, drawing from guidelines such as the International Organisation of Pension Supervisors (IOPS) Good Practices and the G20 High-Level Principles on Financial Consumer Protection.

Additionally, it aligns with the Central Bank of Nigeria (CBN) and the Saudi Arabia Central Bank’s consumer protection frameworks. It is structured into four primary sections: introduction, principles of consumer protection, rights and responsibilities of consumers, and reviews and inquiries.

RIGHTS OF PENSION CONSUMERS

Within the framework, the basic rights of pension consumers have been established for adequate protection. Consumers are to be treated fairly, regardless of the nature of complaint, financial knowledge, status, physical ability, age, gender, tribe, or religion. Pension contributors and retirees have access to an efficient redress mechanism for settlement of claims or disputes. PenCom and LPFOs protect consumer information from unauthorised access and disclosure. Also, LPFOs provide a safe and conducive environment, channels, and platforms for use by the consumers.

In addition, pension contributors and retirees have the liberty to choose from a variety of products and services without restriction. Prospective RSA holders have a right to choose their PFAs. RSA holders also have the choice to transfer from one PFA to another.

They can decide to select either programmed withdrawal or retiree life annuity at retirement for pension payments. They also have the right to be provided with adequate and necessary information needed to make informed decisions.

Therefore, LPFOs are required to provide consumers with accurate and timely information on products and services to enable consumers make informed decisions.

MEASURES FOR COMPLIANCE

Meanwhile, PenCom has instituted measures for enforcing strict compliance with provisions of the framework. These measures encompass comprehensive examination of complaints, performance audits, and the application of essential administrative penalties on any pension fund operator discovered to be in breach of consumers’ rights.

These enforcement measures are carried out promptly, impartially, and resolutely, underscoring PenCom’s dedication to consistently safeguarding consumers’ rights. This commitment demonstrates PenCom’s unwavering dedication to safeguarding consumers.

This initiative reflects PenCom’s proactive approach to consumer protection, ensuring that pension contributors and retirees are treated fairly and that the pension system operates with transparency and accountability. Through ongoing collaboration and vigilant enforcement, PenCom remains steadfast in its mission to uphold consumer rights within Nigeria’s consolidating pension landscape.

The second part of this series will highlight the responsibilities of pension consumers and the responsible business conduct of LPOs.

Based on information by the National Pension Commission (PenCom).