How the transfer window impacts Nigeria’s pension industry

Nigeria’s Pension Transfer Window, which was launched in November last year, has given pension contributors the freedom to switch to their preferred fund administrator. With just over 2,700 pension contributors taking advantage of this transfer window so far, questions arise about the long-term impact on the industry. Niyi Falade, the Managing Director and CEO of Crusader Sterling Pensions, shed some light on the current situation and future prospects in an interview with CNBC Africa. Falade highlighted the significance of the transfer window, pointing out that it accounts for a small percentage of the total pension contributors in Nigeria. He explained that the concept behind the transfer window aims to empower workers by allowing them to choose their fund manager. This shift in responsibility from the employer to the contributor is a fundamental change in the pension system, moving away from the defined benefit scheme where the employer bore the investment risk. The industry is now faced with the challenge of retaining customers, especially for smaller Pension Fund Administrators (PFA). To stay competitive, PFAs must focus on providing excellent customer service and attractive investment returns. While this poses a threat to smaller PFAs, it also presents opportunities for growth and innovation. In terms of the micro pension scheme, the impact of the transfer window remains parallel and voluntary. Contributors to the micro pension scheme will also have the option to choose their preferred PFA, similar to regular pension contributors. This aligns with the overall goal of empowering pensioners to make informed decisions about their funds. Looking ahead, there is a discussion about expanding foreign currency options for pension contributors to mitigate currency risks. The possibility of amending regulations to allow exposure to foreign currency investments could provide more diversification and hedging options for pension contributors in Nigeria. Overall, the Pension Transfer Window is a significant development in Nigeria's pension industry, offering increased control and flexibility to contributors. As more individuals take advantage of this opportunity, the industry is likely to see further growth and innovation in the coming years.