SEPT 2020 | NEWSLETTER
NAICOM AND PENCOM GUIDELINES ON RETIREE LIFE
ANNUITY AND EMPLOYEE GROUP LIFE INSURANCE
POLICY
INTRODUCTION
OVERVIEW OF THE NEW GUIDELINES AND
On the 1st of September 2020, the National
REGULATIONS
Pension Commission (PenCom), in partnership
REVISED REGULATION ON RETIREE LIFE
with
ANNUITY
the
National
Insurance
Commission
(NAICOM) (jointly, the Regulators), issued
the
following
applicable
guidelines
to
the
and
pension
regulations
and
insurance
sectors: (i) the Revised Regulation on Retiree
Life Annuity (RLA); (ii) the Revised Guidelines
on Group Life Insurance Policy for Employees;
and (iii) the Retiree Pack for retirees under the
The newly released Revised Regulation on
Retiree Life Annuity (the Revised Regulation)
was issued to give effect to Section 7(1)(c) of
the PRA which provides that a holder of a
Retirement Savings Account (RSA) shall be
entitled, upon retirement or attaining the age
Contributory Pension Scheme (CPS).
of 50 years, to utilise the amount credited to
According to the Regulators, these guidelines
licensed life insurance company, in line with
and regulations were introduced to provide
guidelines
clarity on the provisions of the Pension Reform
Regulators.
Act 2014 (the PRA), especially those relating
prescribes the modalities for the operation and
to group life insurance policies for employees
administration of RLAs. We highlight some
and retiree life annuities; as well as ensure
salient provisions of the Revised Regulation
safety of retiree life annuity funds and assets.
below:
Additionally,
the
new
their RSA to purchase a life annuity from a
guidelines
and
regulations are expected to serve as a guide
for stakeholders to make informed decisions
regarding their retirement benefits, address
concerns of de-marketing and mis-selling by
pension
and
insurance
operators
in
the
country;
and
ultimately
bring
clarity
and
stability to the pension and insurance sectors
of the economy.
New
to
be
The
jointly
Revised
Eligibility
Insurance
issued
by
Regulation
Requirements
Institutions
-
The
the
thus
for
Revised
Regulation has introduced several eligibility
requirements for insurance companies and
insurance brokers viz:
•
Insurance Brokers and RLA Providers are
now required under the Revised Regulation
to, inter alia: (i) obtain the approval of
NAICOM before marketing or selling their
the new guidelines and regulations
are expected to serve as a guide
for stakeholders to make informed
decisions regarding their
retirement benefits…
1.
Paragraphs 3.1.4, 3.1.5, 3.2.3 and 3.2.4 of the Revised Regulation
RLA products, and NAICOM shall notify
PenCom of such approval; and (ii) comply
with
all
statutory
filings
required
by
1
NAICOM.
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SEPT 2020 | NEWSLETTER
•
In
addition
to
the
above
eligibility
the
Pension
Reform
2004
Old
Regulation),
requires NAICOM to provide to PenCom,
change their RLA Provider after two (2) years
details of RLA Providers and RLA products
of commencement of their RLA contract. This
that: (i) have been suspended; (ii) have
provision
been recalled from suspension; (iii) have
Revised Regulation, which goes a step further
had their license withdrawn; (iv) are under
to stipulate that such changes of RLA Providers
liquidation;
that
by retirees “shall be permissible where the
takeover RLA portfolios of RLA providers in
monthly or quarterly annuity payment is not
and
(v)
companies
2
consequence of the foregoing events.
permitted
reinforced
under
to
the
less than the amount being received from the
Ultimately, the purpose of the new eligibility
requirements in our view, is to make insurance
companies and brokers more accountable, as
well as provide a higher level of protection for
retirees.
previous RLA Provider”.6 In essence, the new
RLA Provider which the annuitant wishes to
transfer his RLA funds to, must be poised to
remit monthly or quarterly annuity payments
that are equal to or in excess of the sum being
remitted by the current RLA Provider. This is
Waiver of Lump Sum and Pension Arrears
by Retirees - The Revised Regulation now
permits a retiree to waive his lump sum and
pension arrears, if any, such that he is able to
receive a higher monthly or quarterly annuity.3
It is important to note however, that once a
retiree
been
were
(the
requirements, the Revised Regulation now
has
retirees
Act
has
waived
subsequently
has
his
such
rights,
total
RSA
and
balance
transferred as premium to an RLA Provider of
his choice, the retiree is prevented from
reversing such waiver.4 The Revised Regulation
further stipulates that where a PFA transfers
the lump sum and pension arrears of a retiree
indeed an attempt by the Regulators to protect
annuitants and guide them to make informed
decisions which would ultimately be in their
best interest.
Further, the Revised Regulation permits RLA
Providers, subject to approval from NAICOM,
to transfer or receive any RLA portfolio or fund
from any other RLA Provider. However, in such
instances, the RLA Provider from whom the
RLA portfolio or fund is transferred shall not be
permitted to undertake any RLA business for
five (5) years from the date of the transfer.7
who has not waived his right to same, the PFA
Duty of Care to Annuitants - Consistent with
shall be liable to repay the retiree’s lump sum
the collaborative efforts of the Regulators to
and pension arrears from its Statutory Reserve
ensure the safety of RLA funds and assets, the
Fund.5
These new provisions are consistent
Revised Regulation has introduced provisions
with the Regulators’ desire to provide greater
on the duty of care owed to annuitants by PFAs
flexibility
whilst
and RLA Providers. These include, inter alia,
simultaneously affording them a greater level
the duty to: (i) act competently and diligently
of protection.
in regard to all transactions; (ii) provide
Change
and
of
benefits
RLA
to
retirees,
Providers
-
Under
the
Regulation on Annuity under Section 4.1(B) of
2.
3.
4.
5.
6.
7.
Paragraph 3.1.3 of the Revised Regulation
Paragraph 5.1.17 of the Revised Regulation
Paragraph 5.1.19 of the Revised Regulation
Paragraph 5.1.18 of the Revised Regulation
Paragraph 7.1.2 of the Revised Regulation
Paragraph 7.2.3 of the Revised Regulation
professional advice or exercise discretion in the
interest of the customer; (iii) avoid sale of
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SEPT 2020 | NEWSLETTER
products which are inappropriate to customers’
core infrastructure project with business plans
needs;
and financial projects which indicate that the
and
(iv)
deal
with
customers’
complaints in a fair and timely manner.8 The
Revised Regulation in essence, provides an
additional layer of protection to annuitants, by
codifying the duty of care owed by PFAs and
RLA Providers, thereby holding them to a
higher standard of care than under the Old
investment
is
economically
Other
Miscellaneous
provisions
to
Investment of RLA Funds - The Revised
including:
expanded
the
scope
of
•
•
by
irrevocable
a
SEC-
subject
to
several
requirements. For instance, the infrastructure
project shall: (i) not be less than Five Billion
Naira
in
value,10
concessionaire
(ii)
with
a
be
awarded
good
track
to
a
record
through an open and transparent bidding
process
which
Infrastructure
is
in
newly
handling process,
complaints
dispute
featuring
of
a
management
inter
alia,
dedicated
the
complaint
response
and
in
writing
inclusion
to
of
the
the
complaints procedure in the RLA Provisional
Infrastructure projects through eligible bonds
securities,
final
complainant,
Agreement;14
Additionally, RLA funds can be invested in
debt
the
desk, a timeframe for RLA Providers to send
recognised rating agency.9
or
and
establishment
Development Organisations (MFDOs) with a
a
websites,
well-documented
procedure;
Institutions (DFIs), or Multilateral Financial
of ‘A’ by
a
handling
by eligible banks or Development Finance
credit rating
their
a detailed complaints
place
standing
payment orders (ISPOs), external guarantees
minimum
on
which requires each RLA Provider to put in
Old Regulation, such instruments shall also
backed
Regulation,
the regime of the CPS;13
for RLA Funds to be invested in financial
be
Revised
novel
prospective retirees who are subscribed to
made using RLA Funds. For instance, in order
now
the
several
released Retiree Pack which is a guide for all
fulfilled in order for certain investments to be
addition to the requirements detailed under the
introduced
a requirement for PFAs and RLA Providers to
display
Funds, and added new criteria which must be
instruments issued by State Governments; in
-
greater safeguards to protect annuitants, the
have
has
Provisions
Presumably as part of their mission to provide
Regulators
investments that can be made using RLA
financially
rewarding for pension funds.
Regulation.
Regulation
and
12
accordance
Concession
and
with
the
Regulatory
•
the prohibition of loans and advances to a
retiree, including incentives, commissions or
payments other than the approved monthly
or
quarterly
annuity;
as
well
as
the
prohibition of pledging RLA related funds
and assets as collateral for any loan by a life
insurance company or their officers, related
party or any person;15
Commission Act (ICRC Act),11 and (iii) be a
8.
9.
10.
11.
12.
13.
14.
15.
Paragraph 9.0 of the Revised Regulation
Paragraph 13.5(a) of the Revised Regulation
Paragraph 13.18(a)(i) of the Revised Regulation
Paragraph 13.18(a)(ii) of the Revised Regulation
Paragraph 13.18(a)(iii) of the Revised Regulation
Paragraph 4.4 of the Revised Regulation
Paragraph 10.1 of the Revised Regulation
Paragraphs 11.1 and 11.3 of the Revised Regulation
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SEPT 2020 | NEWSLETTER
•
the requirement for all marketing of RLA
the Know Your Customer (KYC) guideline
products
issued by NAICOM.20
to
employees
be
of
conducted
RLA
Providers,
only
by
Insurance
Brokers and Insurance Agents who have
undergone
•
a
‘retirement
Insurance Policy for Employees (the Old
planning
Guidelines) merely required employers to
a Code of Ethics and Business Practices for
the employee’s death, the GLIP Guidelines
Licensed Pension Operators, to be adhered
go a step further to prescribe a sanction
17
notify an employee’s PFA and PenCom of
and
where
severe sanctions to be imposed upon RLA
mis-selling.18
For
to
notify
the
resources.21
•
Additionally,
the
GLIP
Guidelines
have
instance, the Revised Regulation provides
introduced a sanction where an employer
that consistent violations of the Regulation
fails to take out a GLIP on behalf of its
shall constitute a ground for suspension of
employees, and death occurs in active
the RLA Provider until such infractions are
service. In such instances, the employer will
addressed.19
now be liable to pay the 300% of the gross
emolument for the Group Life Insurance
REVISED GUIDELINES ON GROUP LIFE
Policy to the beneficiaries of the deceased
INSURANCE POLICY FOR EMPLOYEES
employee, and to pay the difference where
the employer fails to insure its employees
Section 4(5) of the PRA provides that “every
up to 300% of their gross emoluments as
employer shall maintain a Group Life Insurance
stipulated.22
Policy (GLIP) in favour of each employee, for a
minimum of three times the annual total
emolument of the employee and premium shall
be paid not later than the commencement of
the cover”.
Pursuant
•
Similarly, the GLIP Guidelines state that
PenCom
shall
impose
administrative
sanction against employers, while NAICOM
may sanction insurance companies, for non-
to
Regulators
the
have
above
introduced
provision,
the
several
key
provisions through the Revised Guidelines on
Group Life Insurance Policy for Employees (the
GLIP Guidelines), to wit:
necessary
compliance with the GLIP Guidelines.23
The above provisions confirm the intention of
the
Regulators
to
hold
employers
to
the
provisions of the PRA with respect to the
requirement to maintain a group life insurance
Employers shall now be required to provide
minimum
information
of
its
employees and beneficiaries, as required in
16.
17.
18.
19.
20.
21.
22.
23.
fails
be liable to pay the death claim from its
unethical practices such as misinformation,
and
employer
Thus, in such instances, the employer shall
Agents who are found liable for unfair and
de-marketing
an
insurance company of an employee’s death.
Providers, Insurance Brokers and Insurance
•
Whereas the former Guidelines for Life
competency training’ certified by NAICOM;16
to by PFAs and RLA Custodians;
•
•
Paragraph 18.1 of the Revised Regulation
Paragraph 18.3 of the Revised Regulation
Paragraph 18.5 of the Revised Regulation
Paragraph 20.2 of the Revised Regulation
Paragraph 5.1 of the GLIP Guidelines
Paragraph 7.1 of the GLIP Guidelines
Paragraphs 7.3 and 7.4 of the GLIP Guidelines
Paragraph 10.1 of the GLIP Guidelines
policy
for
their
employees,
and
to
hold
insurance companies to a higher standard of
operation and accountability.
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SEPT 2020 | NEWSLETTER
RETIREE PACK FOR RETIREES UNDER THE
the practice of PFAs rejecting RLA Provisional
CONTRIBUTORY PENSION SCHEME
Agreements presented by retirees who are
Under Section 7(1) of the PRA, retirees are
presented with two (2) modes of withdrawal
already prescribed to PW but wish to transfer
to RLA as their preferred mode of retirement.
from their RSA: (i) Programmed Withdrawal
The Retiree Pack further confirms that while
(PW) and (ii) Retiree Life Annuity (RLA). In
retirees may transfer from PW to RLA, they
order to guide prospective retirees in selecting
may not transfer from RLA to PW, as “RLA is
their preferred mode of withdrawal under the
for life”.
CPS, the Regulators have released the new
Retiree
Pack
for
Retirees
under
the
Contributory Pension Scheme (the Retiree
Pack), which
is
to
be
displayed
on
the
websites of all RLA Providers, Insurance Agents
and Insurance Brokers. The main aim of the
Retiree Pack, according to the Regulators, is to
provide answers that would enable perspective
retirees make informed decisions.
Importantly, the Retiree Pack confirms that a
retiree who is subscribed to PW may change to
an RLA; but may do so after at least one (1)
year of its PW subscription. According to the
Regulators, this confirmation seeks to address
CONCLUSION
Undoubtedly, the issuance of the Revised
Regulation and GLIP Guidelines, while long
anticipated, is a laudable development for the
pension and insurance sectors, as it provides
greater
clarity
and
guidance
within
both
sectors (as it relates to Retirement Life Annuity
and
Group
Life
Insurance
Policies
for
employees). The Revised Regulation and GLIP
Guidelines
are
expected
protection
for
retirees,
to
ensure
annuitants
better
and
employees, thereby bringing stability to the
financial sector of the economy.
For further information, please contact:
Jonathan Aluju
Partner
+234-1-2702551 Ext 2720
jaluju@olaniwunajayi.net
Comfort Agboola
Senior Associate
+234-1-2702551 Ext 2612
cagboola@olaniwunajayi.net
Ivie Erediauwa
Associate
+234-1-2702551 Ext 2620
ierediauwa@olaniwunajayi.net
www.olaniwunajayi.net
Olaniwun Ajayi LP
Olaniwun Ajayi LP
@OlaniwunAjayiLP
With nearly 60 years' experience in helping organizations and individuals achieve their goals, Olaniwun Ajayi LP has a track record of involvement in some of the largest and most complex transactions
in dynamic sectors of the Nigerian economy. Our unparalleled capacity to handle intricate legal issues is the bedrock of our practice, and our clients depend on us to help translate their opportunity into
reality
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