Joseph Inokotong, Abuja
The National Pension Commission (PenCom), at the weekend directed all licensed Pension Fund Administrators (PFAs), and Pension Fund Custodians (PFCs) to procure immediately, a Fidelity Insurance Policy to cover a minimum of two percent of Shareholders’ Fund as annual fidelity insurance cover for their employees.
According to the Commission, the Shareholders’ Fund shall be based on the last audited accounts of the PFA/PFC, while the two percent provision on it shall exclude the statutory reserve (and value of real estate financed by shareholders).
PenCom conveyed the directive to the PFAs and PFCs in a circular referenced: PENCOM/INSP/CIR/SURV/19/167, titled: Implementation of the Requirement for the Provision of Fidelity Insurance Cover for Employees of PFAs/PFCs, dated, June 18, 2018.
The circular signed by the Head, Surveillance Department of PenCom, Ehimeme Ohioma, based its action on Section 69 (f) of the Pension Reform Act (PRA 2014), which mandates Pension Fund Administrators (PFAs) and Pension Fund Custodians (PFCs) to provide annual Fidelity Insurance cover for all staff to the full value of the pension funds and assets managed or held by them or as may be determined by the Commission.
It averred that the Fidelity Insurance cover will protect the pension funds and assets from any risk associated with actions or inactions of employees of PFAs and PFCs like dishonesty, negligence, fraud, forgeries and other fraudulent acts that may result in financial losses.
The Commission said it was aware that based on the current value of the assets under management and custody in the industry, providing Fidelity Insurance cover up to the full value of pension assets would have astronomical costs implication to Pension Operators.
The pension industry regulator added that before taking the action, it had taken cognizance of the subsisting guarantees provided by the parent companies of PFCs for the full value of pension funds and assets held in custody on behalf of Retirement Savings Account (RSA), holders or their beneficiaries. The Commission explained that in view of the foregoing, it leveraged on the discretionary powers granted it by appropriate section of the PRA 2014, which deals with the power to determine suitable level of cover.
PenCom said the circular is effective from the date of issue, and directed all enquiries regarding it to the Head of Surveillance Department.
The circular reads in part: ‘Implementation of the requirement for the provision of Fidelity Insurance cover’ for employees of PFAs/PFCs’
“Section 69 (f) of the Pension Reform Act (PRA 2014) mandates Pension Fund Administrators (PFAs) and Pension Fund Custodians (PFCs) to provide annual Fidelity Insurance cover for all staff to the full value of the pension funds and assets managed or held by them or as may be determined by the Commission.
“The Fidelity Insurance cover will protect the pension funds and assets from any risk associated with actions or inactions of employees of PFAs and PFCs like dishonesty, negligence, fraud, forgeries and other fraudulent acts that may result in financial losses.
“The Commission is aware that based on the current value of the assets under management and custody in the industry, providing Fidelity Insurance Cover up to the full value of pension assets would have astronomical costs implication to Pension Operators.
“In addition, the Commission has taken cognizance of the subsisting Guarantees provided by the parent companies of PFCs for the full value of pension funds and assets held in custody on behalf of Retirement Savings Account (RSA) holders or their beneficiaries.
“In view of the foregoing, the Commission has leveraged on the discretionary powers granted it by Section 69 (f) of the PRA 2014 with regards to the determination of an appropriate level of Cover and has, therefore, made the Fidelity Insurance Cover to be a percentage of the Shareholders’ Fund of a PFA/PFC.