The Nigerian pension landscape has witnessed a significant shift in recent years with the introduction of the Retirement Savings Account Transfer System (RTS). This system, empowered by Section 13 of the Pension Reform Act 2014, allows Retirement Savings Account (RSA) holders to transfer their pension funds from one Pension Fund Administrator (PFA) to another, not more than once in a calendar year. This mobility has empowered contributors with greater control over their retirement savings, fostering competition among PFAs to provide better services and returns. Data from the National Pension Commission (PenCom) reveals a substantial movement of funds, totaling N1.41 trillion, transferred by 312,771 RSA holders over the past 16 quarters (four years). This figure underscores the growing engagement of contributors with the RTS and their active participation in managing their retirement savings.
The RTS, launched on November 9, 2020, has streamlined the transfer process, placing the onus on the receiving PFA rather than the transferring PFA. RSA holders initiate the transfer by approaching their desired PFA, providing necessary information like RSA PIN, surname, contact details, and undergoing biometric verification. This simplified procedure, compared to previous complexities, removes bureaucratic hurdles and encourages greater participation in the transfer system. The two-step process involving a confirmation slip signed by the RSA holder and retained by both parties ensures transparency and accountability in the transfer process.
The value of transferred assets has shown a consistent upward trend in 2024, indicating the increasing popularity and utilization of the RTS. In the first quarter of 2024, N120.87 billion was transferred by 22,927 RSA holders. This figure rose to N128.87 billion from 20,993 holders in the second quarter and further increased to N141.87 billion transferred by 23,226 holders in the third quarter. This third-quarter figure represents the third-highest transfer value since the inception of the RTS and signifies a growing confidence among RSA holders in exercising their right to transfer their funds. Cumulatively, the first three quarters of 2024 witnessed the transfer of N391.60 billion by 67,146 RSA holders, a substantial proportion of the total N1.41 trillion transferred since the system’s launch.
Historical data reveals the periods of peak transfer activity. The second quarter of 2023 recorded the highest transfer value of N158.60 billion by 34,359 RSA holders, followed by the third quarter of 2022 with N143.09 billion transferred by 30,973 holders. These periods likely reflect specific market conditions or promotional activities by PFAs that incentivized transfers. The data clearly demonstrate the dynamic nature of the pension landscape and the responsiveness of RSA holders to market changes and improved service offerings.
PenCom emphasizes the positive impact of the RTS on the overall pension industry. Increased competition among PFAs is expected to drive improvements in service delivery and product offerings as they strive to attract and retain RSA holders. This competition ultimately benefits contributors by providing them with a wider range of choices and potentially higher returns on their investments. This dynamic creates a more robust and responsive pension system, catering to the diverse needs of contributors and encouraging greater financial security in retirement.
Beyond the RTS, the Nigerian Contributory Pension Scheme (CPS) has witnessed substantial growth. As of October 2024, total pension fund assets under the CPS reached N21.92 trillion, contributed by 10.53 million registered participants. PenCom’s Director-General, Omolola Oloworaran, projects this figure to surpass N22 trillion by year-end, reflecting the continued growth and resilience of the pension system. However, economic headwinds such as high inflation, naira devaluation, and the impact of monetary policies pose challenges to the real value of pension funds. To mitigate these challenges, PenCom is actively reviewing investment regulations to diversify investments into inflation-protected instruments, alternative assets, and foreign currency-denominated investments, aiming to preserve the value of pension savings and enhance returns for contributors.
