As contributors prepare for pension transfer window

As contributors in the Contributory Pension Scheme (CPS) await the release of guideline for opening of transfer window, understanding the concept and terminologies is critical for effective implementation.

Transfer window is a mechanism which gives pension contributors the right to change their Pension Fund Administrator (PFA) PFA at least one in a year if they have reason to do so.

Section 13 of the Pension Reform Act (2014) specifies that an employee may, not more than once in a year, transfer his Retirement Savings Account (RSA) from one Pension Fund Administrator (PFA) to another.

Operators in the industry however, have said it was in the interest of everyone, particularly contributors that important structures are put in place before the window opens.

This article therefore will try to bring up some of the terms in the PenCom draft guideline for the transfer of retirement savings account, recently exposed for stakeholders input:

Definition of Terms

Pension Administration System (PAS) shall refer to a central system to be domiciled at the National Pension Commission that would be responsible for warehousing all data on pension matters relating to registered contributors/members.

“Registration Module” (RM) shall refer to a module of PAS that would be responsible for the receipt of requests from Pension Fund Administrators (PFAs)/Closed Pension Fund Administrators (CPFAs) for the registration of contributors/members as well as Employer initiated registration in compliance with Section 11 (5) of PRA 2014 for the purpose of generation of a Personal Identification Number (PIN).

“RSA Holder” shall refer to registered contributors and retirees.

“RSA Transfer” shall refer to the transfer of RSA from one PFA to another upon the request of the RSA holder within a calendar year and on the approval of the RTCM.

“Transferring PFA” shall refer to the PFA from which an RSA is being transferred.

“Receiving PFA” shall refer to the PFA to which an RSA is being transferred.

“Retiree” shall refer to an RSA Holder who ceases to make further contribution into his/her RSA as a result of permanent disengagement from service and has executed a Programmed Withdrawal Agreement with his/her PFA.

“Legitimate RSA Holder” shall refer to an RSA Holder whose identity has been confirmed by the Receiving PFA as being the bona fide owner of an RSA being transferred.

“Voluntary Contributions” shall be deemed to be non-obligatory contributions, made by an individual with the sole aim of providing retirement benefits for a future date.

“RSA Transfer Form” shall refer to a document approved by the Commission and completed by an RSA Holder through a Receiving PFA requesting for transfer of an RSA from a Transferring PFA to a Receiving PFA.

“RSA Transfer Clearing Module” (RTCM) shall refer to a module of PAS that would be responsible for coordinating the processes relating to the transfer of RSAs from one PFA to another.

“Transfer Notification” shall refer to the receipt, by RTCM of a duly completed RSA transfer form from the Receiving PFA, in respect of an RSA Holder intending to transfer his/her RSA from a Transferring PFA to a Receiving PFA.

“Date of Receipt” of a transfer notification shall be deemed to be the day on which RTCM receives the duly completed RSA transfer form.

“Calendar Year” shall refer to a consecutive period of twelve months.

“Calendar Quarter” shall refer to a three-month period regarded as one of four parts of a calendar year. The 1st Quarter of every calendar year shall be deemed to be the period between 1st January to 31st March, while the 2nd , 3rd and 4th Quarters shall be 1st April to 30th June, 1st July to 30th September and 1st October to 31st December respectively. Therefore, where a transfer has been approved for an RSA within any quarter of a calendar year, such RSA shall not be eligible for another transfer until twelve consecutive months from the date of the last approved transfer.

“Effective Transfer Date” (ETD) shall refer to the last day of the last month of a calendar quarter namely 31st March, 30th June, 30th September and 31st December respectively. Notwithstanding the provisions of 2.1.15 above, where a transfer notification is received within the last month of a calendar quarter, the ETD shall be the last day of the last month of the following calendar quarter.

“Transfer Value Payment” shall refer to the balance standing in the RSA as at ETD. This shall include accumulated contributions and accrued rights paid into the RSA, plus all investment income earned and accruable within the transfer quarter.

“Detailed RSA Transaction History” shall refer to a detailed and complete statement of account of an RSA Holder starting from July 2004 or date of appointment if after July 2004 till ETD.

“Net Transfer Position” shall be the summation of all transfers to and from a particular PFA within a specified transfer period, netted-off to arrive at either a credit or debit position.

“Net Credit Transfer Position” shall refer to an amount by which the total transfer value of RSAs coming to a PFA exceeds the total transfer value of RSAs leaving that particular PFA, within a calendar quarter. Where this occurs, the affected PFA shall expect funds inflow from other PFAs.

“Net Debit Transfer Position” shall refer to an amount by which the total transfer value of RSAs coming to a PFA is less than the total transfer value of RSAs leaving that particular PFA, within a calendar quarter. Where this occurs, the affected PFA shall be expected to remit funds to other PFAs.

“Transfer Suspense Account” (TSA) shall refer to a general ledger account maintained by PFAs and PFCs, for the purpose of warehousing RSA balances to be transferred upon receipt of an approved

RSA transfer from RTCM. In addition, contributions received after ETD either relating to period before or after ETD shall be warehoused in the TSA before being remitted.