Pension Reform: NSITF At Advantage - Expert
By Nnamdi Duru
Nigeria Social Insurance Trust Fund (NSITF), the social insurance service provider set up by the Federal Government for the benefit of the private sector has been said to have comparative advantage over other Pension Fund Administrators (PFAs)in the new pension dispensation.
The advantage according to an expert, would flow from existing infrastructures and established network in addition to necessary managerial know-how, experience at the disposal of the organisation even before the emergence of the new pension regime.
This observation was made by the Managing Director of African Alliance Insurance Plc, Mr. Ope Oredugba in a paper delivered at the 2-day workshop on "Pensions Act 2004" packaged by the umbrella body of underwriters in the country, Nigerian Insurers' Association (NIA) in Lagos recently.
In his paper titled, "Other Aspects of the Pension Act: NSITF, Investment, Penalties for Offenders", he traced the origin of the fund to the Decree No. 73 of 1993 which repealed the National Provident Fund (NPF) Act. The Act according to him set up the fund as social insurance scheme covering only workers in the private sector that have contributed over time into the fund.
Under the new pension regime imposed by the Pension Reform Act, 2004, NSITF according to Oredugba would need to register as a PFA before canvassing and competing for pension business with other PFAs while existing contributors would have to remain with the fund for the next five years.
Assets held by the fund would also be transferred to a Pension Fund Custodian (PFC) while retired NSITF contributors would be paid in accordance with Section 4 of the Act or in lump sum according to the rules and regulations set out by the National Pension Commission (NPC), he explained.
NSITF Oredugba maintained would still continue to render social security insurance services in accordance with Section 71 of the NSITF Act.
According to him, eye brows have been raised as a result of the conditions set out for NSITF over whether or not contributory rates would be reduced. He also queried why NSITF alone was singled out to enjoy a 5-year transition period as well as when the fund would be transferring its assets and funds to a PFC.
Reviewing the Act further, Oredugba weighed the prospects of the fund under the new pension dispensation, submitting that it is at an advantage over other PFA yet to be formed by corporate bodies willing to go into pension fund administration.
He noted that the NSITF's PFA advantage would see to the entrenchment competition in pension business in the country even as the fund has in place necessary managerial know-how to handle pension fund administration creditably.
He further observed that the management of the fund was already abreast with the technicalities and experience involved in pension fund administration as against up coming PFAs that have to learn and study the new approach.
In addition, he said that the PFA to be set up by NSITF would enjoy the advantage of having in place necessary infrastructures and established network in all the states of the federation.
Following the signing into law of the Pension Reform Act, 2004 by President Olusegun Obasanjo recently, NSITF has ceased to be a pension services provider. The Act limited its scope to social insurance services with an option of setting up a pension fund administrator.
The Managing Director of the fund, Alhaji Mohammed Rufai who, reacted to the new development said, "what happened to NSITF now is that the Act, under sections 42 and 71, has redefined the functions of NSITF. It divided the activities of NSITF into two. On the one hand, NSITF is allowed to register a pension fund administrator to compete with any other PFA... On the other hand, NSITF is allowed to do social security".
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