Understanding The Fiduciary Role Of Pension Fund Administrators Under The Contributory Pension Scheme

The Contributory Pension Scheme (CPS) is often described as fully-funded due to the individual Retirement Savings Accounts (RSAs) where monthly pension contributions are remitted. The individual RSAs opened with a Pension Fund Administrator (PFA) are pooled into a Fund and managed as investments in various allowable instruments.

Pension fund investments seek to ensure timely payment of benefits to employees upon retirement. Consequently, the overriding philosophy guiding investments is the maintenance of safety and fair returns.

The National Pension Commission (PenCom) has issued the Regulation on Investment of Pension Fund Assets (the Investment Regulation) to regulate all pension fund investments. While the PFA is responsible for taking investment decisions and ensuring safety and fair returns for the benefit of contributors, the Pension Fund Custodian (PFC) ensures safe custody of the assets.

Guided by the Investment Regulation, all investment decisions are taken by the PFA on trust, as a fiduciary duty on behalf of pension contributors. The pension funds are also segregated from the assets of a PFA, and all incomes earned are exclusively for the benefit of pension contributors.