In a landmark development, a staggering 101,820 Retirement Savings Account (RSA) holders in Nigeria switched their Pension Fund Administrators (PFAs) in 2023, marking a significant 10.2 per cent surge compared to the previous year.
This unprecedented move has been fueled by the reopening of the transfer window by the National Pension Commission (PenCom) in Q4 2020.
The total amount in motion during the review year amounted to a whopping N462 billion, showcasing a remarkable 28 per cent increase from the previous year. Since the initiation of the transfer window, the cumulative transfers have now surpassed N1.14 trillion.
This surge is in direct accordance with Section 13 of the Pension Reform Act (PRA) 2024, allowing RSA holders to seamlessly transfer their accounts from one PFA to another. The recapitalization of PFAs, escalating from N1 billion to N5 billion, has spurred a series of industry mergers and acquisitions, contributing to enhanced competition among administrators.
In tandem with this transfer trend, the pension industry has witnessed substantial growth in recent years. Over the past three years, more than 950,000 new RSA registrations have been recorded, pushing the total registrations to an all-time high of 10.16 million individuals.
Moreover, the total pension assets have surged to a record-breaking N17.93 trillion as of November 2023, reflecting a 1.5 per cent monthly increase from the previous month. According to PenCom, Nigerian pension assets have seen an impressive increase of over N2.93 trillion between January and November 2023.
As per asset allocation, a considerable 66 per cent of the funds have been strategically invested in fixed-income securities, predominantly Federal Government bonds, accounting for approximately N11.25 trillion. This aligns with PenCom’s regulatory approach, emphasizing the conservative use of public funds.
In a notable shift, investments in the local equities market have experienced robust growth, surging by 64 per cent to reach N1.49 trillion. This surge is attributed to the bullish performance of the Nigerian stock market, boasting an annual return of 45.9 per cent in 2023.
Breaking down the pension assets further, N1.91 trillion is invested in corporate debt securities, while N1.55 trillion is deployed in money market instruments.
Facilitating these transfers is the RSA Transfer System (RTS), an electronic platform streamlining the coordination of all processes related to RSA transfers. Transfer requests are processed quarterly, based on Effective Transfer Dates (ETDs). Notably, RSA holders become eligible for subsequent transfers only after 365 days from their last approved transfer.
This surge in RSA transfers signifies a dynamic and competitive pension landscape, fostering growth and reshaping the industry’s dynamics. With record-high transfers and growing assets, Nigeria’s pension industry is poised for continued expansion and evolution.
