Thursday, August20, 2020 / 01:51 AM / by Akin Adeniyi of KingsThrones Ltd / HeaderImage Credit: BCSC Investment

"The opening of the transfer window willfacilitate full and equitable pension assets portability within the pensionindustry, enhance ethical competition amongst the PFAs and improve servicedelivery to RSA holders. The Commission is optimistic that all necessarypreparations will take place to enable opening of the RSA Transfer Window bythe end of the year."

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

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

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

As the years rolled by, and the scheme is now grown inoperational complexities as expected, I believe the leaving behind of standardsyet in the area of performance reporting now finds another brilliantopportunity in this transfer window project to be comprehensively addressedonce and finally. I consider it should ordinarily be untoward or simplydifficult to arrive at such an important decision of switching PFAs where theRSA transferor's main or topmost reason is performance, without a standardizedand easily comparable track record of such performances. The simple objectiveis to create a level playing ground for all PFAs to make sure theirperformances meet the FAC principles of Performance Standards - Fairness,Accuracy and Completeness.

There's certainly quite much to this necessity than Icould possibly cover all here, but I would expect that in the bid to gettingthings ready for the eventual pronouncement, PenCom will be making far reachingchanges/upgrades in the investment regulation addressing performancecalculation 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 environmentas desired in the industry can hardly thrive in the absence of the muchrequired transparency in the performance numbers. Particularly when/where suchnumbers are derived from unstandardized procedures.

In closing, I should mention that I am not unaware ofthe steps being taken in this direction as a 'stakeholder', I am onlyparticular about the pace and if the suggested standardization can be achievedby or before the December target date for the window opening so that we do notend up putting the proverbial cart before the horse. And in any case, with orwithout the transfer window project, the fairness and credibility of theindustry as a whole yet rest largely on this need for a standardizedperformance reporting amongst the service providers. At the level ofadvancement we currently are, practices short of global standards equally oughtto be in acutely short supply within our systems.

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

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

About the Author

Akin' Adeniyi is the Chief RelationshipOfficer of KingsThrones Limited

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