From Abosede Musari, Abuja

Two regulatory bodies, National Insurance Commission (NAICOM) and Pension Commission (PENCOM), yesterday in Abuja, jointly issued a document containing regulations that will henceforth govern the conduct of annuity business in Nigeria. The document, which is being issued for the first time, will undergo regular reviews as time demands.

The document, according to the two bodies, provides rules of operation to stakeholders in the insurance and pension industries as it concerns the issues of retirees and their access to retirement benefits as at when due.

Speaking at a joint press conference held by the two bodies to announce and release the regulatory guidelines in Abuja, yesterday, Commissioner for Insurance, Mr. Fola Daniel, said the document was induced by the enactment of the Pension Reform Act of 2004 which made it mandatory for any employment in the Federal Public Service, Federal Capital Territory and the private sector to establish a contributory pension scheme from which payments of retirement benefits will be made to retiring employees.

As provided for by the Act, the modalities for payment of retirement benefits are through life annuity, which is obtainable from Life Insurance companies or through Programme Withdrawal, which is obtainable from Pension Fund Administrators. Either of the two methods is available depending on the choice of the employee.

The commissioner explained that life annuity was a stream of periodic payments that commences at a specified date, which is either the normal retirement age or at 50 in the case of early retirement.

This payment, he said, could either be monthly or quaterly depending on the retiree's preference.
The benefits, according to him, include the continuous flow of regular income for the retiree, insulation from the risk associated with the investment of lump sum benefits, structured management of resources and the transference of the risk of diminution in assets and possible failure of investments of retirees to insurance companies which are better equipped to manage such risks.

Up till yesterday, there has been regulation for pension administrators who manage the Programme Withdrawal option but no for the Life Annuity option.

This gap, according to Daniel, informed the collaboration of the two regulators, NAICOM and PENCOM, to set up a joint committee to produce the regulation on annuity. This committee, he said, had been at work since September 2008

"Following the release of the regulation, life insurance companies are expected to rise to the challenges of providing new products and modifying existing products to align with economic realities and value added needs of retirees.

"Expansion in the branch network, efficient deployment of information and communication technology and prompt payment of benefits will provide the competitive advantage for the operators.

"Whilst the Commission is repositioning for the verile and responsive industry supervision and regulation is continuing, it is my expectation that excellent service will be the watchword of operators through compliance with good ethics and norms, thus making enforcement rules a distant necessity", he said.

Director-General of PENCOM, Mr. Mohammed Ahmad, in his address at the press conference, said the release of the regulation was another milestone in the collaborative effort of both Commissions at ensuring a better pension environment for workers in Nigeria.

"A couple of years ago, in collaboration with the Commission, we issued regulations on group life insurance which is one of the requirements of the Pension Reform Act mandating every employer that falls within that category to take a life policy. I hope insurance companies are following up to make sure that that regulation is being complied with.

"Today we are also taking another collaborative effort jointly with NAICOM to issue regulation on annuity. Section 4 of the Pension Reform Act provides that upon retirement as an employee, you are entitled to two options, you either take the programme withdrawal which allows your Pension Fund Administrator to continue to manage your fund until you exit the system or you take an annuity. Annuity regulations have not been developed until today".

He noted that at PENCOM, it is their duty to ensure that when employees retire, they get their retirement benefits as at when due and that was the reason behind the issue of the regulation. He therefore, promised that the Commission will do everything within its mandate and means to make sure that any party involved in managing pension assets, whether it be an insurance company or a pension administrator comply with the provisions of the Act.

He stated that both Commissions had agreed on common parameters as regards the supervision of operators in both industries to ensure they comply with the provisions. He then asked the operators to imbibe a high standard of corporate governance.

Issuing a note of warning to dubious operators, Ahmad said: "We expect very transparent and open competition. If there is any party or participant that believes it can take advantage of this system, let it think twice. We will go to any extent to protect the employees. That we cannot compromise. If anybody believes that he can take money from retirees and default later, we are going to take necessary actions.

"As regulators, we will ensure that operators play the game according to the rules. We will ensure a level playing field.

The process of purchasing annuity will be automated by having an online auction system.

"We will not take it lightly with any operator, either in the pension industry or the insurance industry involved in unethical marketing strategy".

"NAICOM will ensure that no policy will be misleading to offer unreasonable proposals or benefits that are non-existent. If there is any operator that gets involved in unethical marketing strategies, we will take necessary actions to impose sanctions on such.

"The Commission will like to assure Nigerians that we will collaborate with NAICOM to ensure that any one who subscribe to either programme withdrawal or life policy gets his benefits as at when due", he said.

Some of the provisions of the regulation, which were made available to journalists include that a retiree shall not be compelled to choose a particular option except the one he is so convinced or the one he desires. It also provides that all payments to the annuitant shall be made not later than 25th of every month.

It also provides that the life insurance company shall maintain separate books of account in respect to the Retiree Life Annuity Funds, which shall be audited yearly by a firm of chartered accountants.