Rescuing data challenge at PenCom with technology

The current registration system at the National Pension Commission (PenCom) is limiting its potential. Of course, with the new initiatives aimed at enhancing the contributory scheme, there is a need for efficiency. Besides, some Nigerians resident abroad have expressed a desire to become part of the scheme, but the enabling technology has remained a barrier. If the contributory scheme would make a new significant leap, then technology must be “consulted”.

Interestingly, PenCom had recently introduced an Enhanced Contributor Registration System (ECRS) in a bid to solve the challenges faced with the existing Contributor Registration System (CRS). Besides helping to lift contributors’ confidence in the industry and bring in more people into the financial system, the enhanced application is also expected to open up transfer window for Retirement Savings Account (RSA) holders to switch Pension Fund Administrators (PFAs) seamlessly. The ECRS would also enable Nigerians based abroad to participate in the Contributory Pension Scheme (CPS) and deepen contributors’ confidence in the industry.

In a world ruled by inventions, technology is seen as the way to go. It is embraced daily by institutions that think and act ahead. Technology does not only make agencies’ operations seamless but brings efficiency and trust to their services.

For PenCom, one of the biggest challenges confronting Nigeria’s pension industry is cleaning up existing data of contributors and pensioners under the CPS. Thus, to fix this challenge, it became a priority to transit from the use of the precursor application- CRS, to a more robust ECRS to enable the commission to entrench efficiency and transparency in its operations.

PenCom said the ECRS was designed, developed and deployed to provide a more dynamic and friendly user interface, even as it fully addresses the issues identified with the CRS. Thus, the deployment of the ECRS will greatly enhance the integrity of contributors’ data and provide a platform for registration of Micro Pension Plan and cross-border participants- Nigerians living abroad and foreigners living in Nigeria.

According to a statement from the commission, the electronic submission of employer code requests and the full automation of the process of issuing employer codes are now possible. There would be updates and editing of contributors’ information on the National Databank maintained by the National Pension Commission by the PFAs.

The deployment of the ECRS is a major step towards the introduction of the transfer window, which will enable contributors to change to the PFAs of their choice, in line with Section 13 of the Pension Reform Act (PRA) 2014.

The commission has affirmed that the ECRS has been integrated with the National Identity Management Commission (NIMC) for authentication of the uniqueness of individuals seeking to register under the CPS.“The ECRS is an electronic platform for the submission of requests by Pension Fund Administrators (PFAs) for the registration of contributors and issuance of Personal Identification Numbers (PINs). Consequently, the commission has transited from the use of the existing CRS) to the ECRS,” the statement noted.

The Pension Act
The Pension Reform Act mandates every employer with a minimum of three employees to open an RSA for the workers, which would be funded by both employer and employees. The employer is required to pay 10 percent, while the workers are required to contribute eight percent of total monthly emolument. Under the CPS, the PFAs manage the funds which are in the custody of the Pension Fund Custodians (PFCs).

The Acting Director-General of PenCom, Mrs. Aisha Dahir-Umar, said the commission introduced the ECRS because it has seen the tremendous positive impact, which technology can make on the pension industry.She explained that the ECRS consists of six major functions- contributor registration to generate unique pin; recapture for existing contributors; bio-data update; update of signature and picture, where applicable; temporary PIN for employer initiated registration; and Retirement Savings Account (RSA) verification service.

Dahir-Umar, said that the assets under the CPS had continued to rise, hitting N9.03 trillion “since the introduction of the CPS and I am pleased to note that appreciable progress has been made consistently”.

According to her, the statistics are clear evidence that the CPS has greatly improved access to retirement benefits for employees in both the public (Federal Government) as well as the private sectors. For contributors’ data integrity, the enhanced registration system also has the following capabilities: dashboard availability for Pension Fund Administrators (PFAs) to view the status of their requests and summary reports and PFAs can also receive notifications via Dashboard, emails and Error Codes.

The Head of Corporate Communications Department of PenCom, Peter Aghahowa, said that the commission’s authorized staff can also use the ECRS to view the status of submissions by PFAs, generate reports and approve requests that require authorization.

In addition to download responses, latest upgrades, patches, employer codes generation, the system also has the capacity for National ID verification with NIMC.

ECRS debut
On June 24, 2019, after PenCom assessed the environmental readiness of PFAs and pilot run for the PFAs to use ECRS, it was inaugurated. This new development is significant for the pension industry as it may pave the way for the implementation of other critical policies hitherto prevented by poor contributors’ data.

One of such policies is the transfer window provided in the Pension Reform Act, 2014 (PRA, 2014), allowing RSA holders to switch PFAs if they so desire. Under the CPS, a comprehensive and reliable data of RSA holders had been a huge challenge, a development some sources said was the reason why PenCom has been reluctant in opening up the transfer window.

Section 13 of the Pension Reform Act 2014 also provides that “subject to guidelines issued by the commission, a holder of retirement savings account maintained under this Act may not, more than once in a year, transfer his account from one Pension Fund Administrator to another.” Despite this provision, PenCom is yet to authorize PFAs to allow RSA holders to transfer their RSAs from one PFA to another.

The implication of the non-availability of the RSA transfer window is that RSA holders, whose PFAs are underperforming in terms of return on investments, are stuck with such PFAs as they cannot move their contributions to PFAs with a better history of high returns on investment.

Indeed, poor contributors’ data integrity has been a major hindrance to the opening of the transfer window. There are concerns among pension managers and operators that until existing data of contributors are properly refined and deemed reliable, there will be cases of identity theft and large-scale frauds.

The coming of ECRS is one of the innovations of the Commission to clean up the database of RSA holders to ensure that issues such as duplications and misinformation are tackled.

In this regard, PenCom recently directed all RSA holders to provide their National Identity Number (NIN) to their fund managers. The new development involved both active and retired RSA holders and is in line with the Federal government’s policy mandating all Nigerians to have a National Identity Number.

By law, the NIMC has the mandate to implement the National identity system in Nigeria and the harmonization by all data-gathering agencies may be part of the federal government’s strategy to have a clean National Identity System. PenCom advised RSA holders to approach their PFAs to provide their Bank Verification Numbers (BVNs), NIN as well as other needed biodata.

These latest innovations, ECRS and integration of BVN and NIN with RSAs, maybe a golden opportunity for PFAs to clean up their databases to combat identity theft as well as prevent fraud in the pension industry.
A Lagos based pension contributor, Mathias Abiodun, said a clean database in the industry will also pave the way for the introduction of the transfer window that will enable RSA holders to switch accounts from one PFA to another to get better services.

He believes that the issue of the role of pension funds in economic development had moved into the focus of public attention, particularly with regard to Nigeria’s growing need for long-term capital.

Abiodun explained that successful mobilization of pension fund assets and contributions to the economic growth of any nation were essential policy objectives. “For the first time, our country can now boast of a long-term funding base and the impact to date has included the funding of the government and government projects, development of the capital market as well as increased foreign development inflows,” he added.

Pension assets
The PenCom data showed that total pension assets in the country have risen to N9.03 trillion as at March 31, 2019, up from N7.44 trillion as at January 2018. According to the commission, these assets have been judiciously and prudently invested in 24 major asset classes to yield interests to the contributors.
Giving a breakdown of how the assets were invested, the Commission said the federal government’s securities took a lion-share of the investment as it received well over N6.51 trillion, representing 72.9 percent of the total assets.

Specifically, Federal Government bond got N 4,458,806.38 of the funds, representing 49.37 percent of the total assets; while N1.94 trillion was invested in treasury bills (21.44 percent); N11.96 billion in Agency Bonds (NMRC & FMBN), (0.13 per cent); N94.11 billion in Sukuk (1.04 per cent) and N8.51 billion in Green Bonds, (0.09 percent.).

The commission also said in line with the Multi-fund structure, Retirement Saving Account (RSA) Fund 1, witnessed N12.73 billion investment and RSA Fund 11, recorded N3.99 trillion investment, RSA Fund 111, saw N2.15 trillion investment while RSA Fund IV, recorded N732.13 billion investment.

The report showed that N596.61 billion, which was 6.54 percent of the funds, was invested in domestic ordinary shares; while N62.59 billion, amounting to 0.69 percent was invested in foreign ordinary shares.
Also, N144.31 billion (1.60 percent) was invested in state government’s securities; corporate bonds got N463.99 billion (5.4 percent); corporate infrastructure bonds, received N8.64 billion, (0.10 percent); corporate green bonds, N5.46 billion(0.06 percent); supra-national bonds got N5.37 billion (0.06 percent); local money market, N874.39 billion, (9.68 percent) commercial papers, N64.46 billion (0.71 percent); banks- N809.94 billion (8.97 per cent), among others.