That Our RSA Transfer Process May Be Truly Equitable and Ethical


Thursday, August 20, 2020 / 01:51 AM / by Akin Adeniyi of KingsThrones Ltd / Header Image Credit: BCSC Investment


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"The opening of the transfer window will facilitate full and equitable pension assets portability within the pension industry, enhance ethical competition amongst the PFAs and improve service delivery to RSA holders. The Commission is optimistic that all necessary preparations will take place to enable opening of the RSA Transfer Window by the end of the year."


The above quote (emphasis mine) is the last paragraph from the regulator's latest release on the renewed preparation for opening up the long-awaited transfer window to facilitate the voluntary transfer of contributors' RSAs from one PFA to another, commencing hopefully by the end of year 2020. Without a doubt a welcome idea that has been long outstanding, but with the hope that for final implementation as proposed, ALL necessary requirements will be institutionalized also as promised. One of such critical requirements being fairly comparable performance numbers.


Interestingly I had done an article on a similar subject here about two or more years ago to address some contributors' agitations over what they had considered poor investment returns on their pension savings. Whilst this challenge seems to persist within the limitations imposed by the macro economy however, it is not enough justification yet for not toeing the appropriate path of best practices in our dealings.


This piece however speaks to ONLY ONE of the many possible factors that may influence the RSA owner's decision to make that desired change or switch - INVESTMENT PERFORMANCE. I suppose by now too, either the regulator herself or the PFAs must be conducting relevant studies to test the significance of the number of such possible factors in total, that may dominate RSA owners' reasons for making the important move. What my advocacy here is all about however is so that the system can completely avoid or prevent an account movement based on unverifiable and incomparable performance numbers - that would be simply inequitable, punching a major hole in the otherwise laudable objective of the regulation, with the high propensity for engendering unethical practices, and a trend not boding well for the industry in general. Whilst my take here is on performance comparability standards alone, it does not by any means attempt to take away from the relevance/importance of such standardization also to other aspects of the whole process.


As the years rolled by, and the scheme is now grown in operational complexities as expected, I believe the leaving behind of standards yet in the area of performance reporting now finds another brilliant opportunity in this transfer window project to be comprehensively addressed once and finally. I consider it should ordinarily be untoward or simply difficult to arrive at such an important decision of switching PFAs where the RSA transferor's main or topmost reason is performance, without a standardized and easily comparable track record of such performances. The simple objective is to create a level playing ground for all PFAs to make sure their performances meet the FAC principles of Performance Standards - Fairness, Accuracy and Completeness.


There's certainly quite much to this necessity than I could possibly cover all here, but I would expect that in the bid to getting things ready for the eventual pronouncement, PenCom will be making far reaching changes/upgrades in the investment regulation addressing performance calculation with specific and unequivocal requirements for items including: 

  1. Valuations;
  2. Returns and Risk calculation methodologies;
  3. Treatment of fees;
  4. General and Specific Disclosures;
  5. Presentation, and more.


Arguably not all investors are performance chasers, but a truly equitable transfer process and an ethical competition environment as desired in the industry can hardly thrive in the absence of the much required transparency in the performance numbers. Particularly when/where such numbers are derived from unstandardized procedures.


In closing, I should mention that I am not unaware of the steps being taken in this direction as a 'stakeholder', I am only particular about the pace and if the suggested standardization can be achieved by or before the December target date for the window opening so that we do not end up putting the proverbial cart before the horse. And in any case, with or without the transfer window project, the fairness and credibility of the industry as a whole yet rest largely on this need for a standardized performance reporting amongst the service providers. At the level of advancement we currently are, practices short of global standards equally ought to be in acutely short supply within our systems.


It would be very useful at this point to thoroughly consider the bases that constitute an equitable transfer for the RSA owner, again particularly in matters of funds performances and comparability at least across the industry. Ethics on the other hand will depend on how well we can regulate competition with or without such germane standards.


The good news is that we can bag both conveniently, if we are ready to leave no stone unturned in the journey.


About the Author

Akin' Adeniyi is the Chief Relationship Officer of KingsThrones Limited


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