In furtherance of its regulatory drive to improve pension administration in the country, the National Pension Commission (PenCom) has authorized Pension Fund Administrators (PFAs) to appoint external auditors and actuaries for Approved Existing Schemes and Additional Benefits Schemes.
In the latest circular signed by the Director of the Surveillance Department, A. M. Saleem, to the licensed PFAs, the commission indicated that the directive was sequel to the failure of the Trustees/Sponsor Companies of the pension schemes to appoint external auditors and actuaries for the schemes as mandated by law.
It cited Section 50(2) of the Pension Reform Act 2014, which states that “an employer operating any Defined Benefits Scheme shall undertake, at the end of every financial year, an actuarial valuation to determine the adequacy of its pension fund assets”, to justify its latest stance.
Also, Section 2.1(3) of the Framework for the Establishment of ABS issued by the Commission mandates Trustees/Sponsor Companies of AES/ABS to appoint an actuarial firm and external auditor to undertake an actuarial valuation and audit of the scheme, respectively, in accordance with the provisions of Sections 50(2) and 66(2) of the PRA 2014.
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However, the pension industry regulatory commission maintained that its supervisory oversight of the PFAs showed that most of the Trustees/Sponsor Companies of AES/ABS were in default and failed to appoint an actuarial firm and external auditor to undertake the valuations and audits of their operations and financial statements.
The PenCom clarified: “The failure of the Trustees/Sponsor Companies to appoint the auditors and actuaries poses a risk to the going concern of the schemes’ ability to meet obligations to members and is a violation of the PRA 2014 and regulations issued by the Commission.”
To ensure compliance with the statutory requirements by the PFAs, the commission issued new guidelines, which stated: “(i) Two months before the end of each financial year (31 December), the PFA or the Lead PFA of the AES/ABS shall notify the Trustees/Sponsor Companies to appoint an external auditor and an actuary. (ii) The PFA shall send a reminder if the Trustee/Sponsor Company has not made the appointment within 21 days of receiving the PFA’s letter. The reminder shall state that if no formal response is received after five working days, the PFA will proceed to appoint an external auditor and actuary and forward the terms of engagement to the Commission for approval.
“(iii) Upon receipt of approval from the Commission, the PFA shall notify the Trustee or Sponsor Companies of the terms of engagement. (iv) The PFA shall also inform the Trustee or Sponsor Companies that the audit/actuarial fees shall be charged to the related scheme under the management of the PFA after obtaining the Commission’s approval”, the PenCom added.
In a related development, the commission has directed all Federal Government self-funded agencies, whose salary structures had been captured in the National Salaries, Incomes and Wages Commission (NSIWC) circulars, to implement the various pension increases for eligible retirees, adding that those not mentioned in NSIWC circulars to liaise with the NSIWC to determine the appropriate pension increases applicable to their retirees.
