New banking regime: PenCom to transfer assets of bank-owned PFAs
March 08, 2011
There are indications that the National Pension Commission may transfer the assets of bank-owned Pension Fund Administrators, who are unable to stand on their own after the divestment of their parent banks, to other PFAs.
The Director-General, National Pension Commission, Mr. Mohammad Ahmad, who confirmed this in an exclusive interview with our correspondent, said that the repeal of the universal banking model by the Central Bank of Nigeria would not in any way affect pension contributors as the commission would closely supervise the divestment of the banks from the PFAs.
“However, in the event of the collapse of a PFA for any reason, the management of the pension assets will be transferred to another licensed PFA,” Ahmad said.
The CBN had, last year, abolished the universal banking system and directed all Deposit Money Banks to divest from all non-banking business.
Ahmad said that so far, the banks had yet to notify the commission of what they planned to do with their pension management subsidiaries.
Some of the PFAs owned by banks include Fidelity Pension Managers Limited, a subsidiary of Fidelity Bank Plc; UBA Pensions Custodian Limited, a subsidiary of the UBA Group; and Legacy Pension Managers Limited with First City Monument Bank Plc holding substantial stakes in the company.
Ahmad, however, noted that Section 5 (1) (d) of the CBN’s Regulation on the Scope of Banking Activities and Ancillary Matters, No. 3 of 2010, classified custodians as related banking business, hence the four Pension Fund Custodians in existence would not be affected by the new regime.
He added that banks that had shareholdings in the PFAs were required by the regulation to divest their holdings as they were not into banking-related business.
He pointed out that the closing down of a PFA or PFC business would not have any effect on the entire pension scheme as pension assets were not kept in liquid form but in eligible instruments like treasury bills, equities, money market instruments, FGN bond certificates and others.
Pension assets, according to him, are invested by the PFAs in primary and secondary security markets, while the PFCs are charged with the responsibility of safe keeping of the instruments.
The PenCom boss said, “In the event of winding down of business, the PFA will be directed to simply transfer all the pension assets under its management to another licensed PFA. In the same vein, in the case of a PFC, it will be required to transfer the pension assets under its custody to another licensed PFC.”
Ahmad noted that this had earlier been successfully done in the case of Standard Alliance Pension Fund Administrator and Oceanic Pension Fund Custodian, which returned their operating licences to the commission.
He disclosed that SA PFA had a total of N1.42bn pension assets, which were transferred to Pension Alliance Limited, while the total pension assets in the custody of Oceanic PFC that were transferred to Diamond PFC stood at N42m.
The director-general said that the initiative to return their operating licences to the commission was a business decision taken by the two companies.
He pointed out that pension was a retail business, which was long term in nature and driven by the volume of funds under management or custody.