CLOSED PENSION FUND ADMINISTRATOR (CPFA)

Pension schemes in the private sector existing prior to the introduction of the Contributory Pension Scheme (CPS) in June, 2004 were allowed to continue as CPFAs, subject to guidelines issued by PenCom. The companies are required to have operated a fully funded existing pension scheme with assets of at least N500 million. A condition precedent on the issuance of a CPFA license is that the company must possess the requisite capacity for the management of pension fund assets and show that it had managed its pension scheme effectively for at least five (5) years prior to the commencement of the CPS.

The CPFAs operate mostly as Defined Benefits Schemes with a guarantee from the sponsor companies over any funding deficit. The Pension Reform Act, 2014 has foreclosed new entrants into the CPFAs. Commencing 1st July, 2014, all new employees of the sponsor companies are required to join the CPS and open Retirement Savings Accounts (RSAs) with a PFA of their choice. Furthermore, an existing employee still reserves the right/option of pulling out of the CPFA to join the CPS.