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By: Moshood Ayeni

I get asked a lot about how the PFAs make their money. Through these interactions, I discovered that there are different notions about how people think the PFAs are making their money.

Some have a notion that the PFAs take a part of their contributions and keep for themselves while some others think that the PFAs share in the proceeds of Investment arising from their pension contributions.

This piece is aimed at educating the public on this topical issue and also help to shed light on this somewhat grey area.

To start, let’s quickly shed light on who a PFA is.

Who is a PFA?

A PFA or Pension Fund Administrator is a licenced institution charged with the responsibilities of administering the retirement benefits of pension contributors.

This administrative duties include receipt of periodic pension contributions, investing of pension contributions, safeguarding the assets of contributors through proper management, payment of retirement benefits and so on.

In carrying out its duties, a PFA is guided by extant laws, guidelines and regulations issued on from time to time by its regulator, which is the National Pension Commission (PenCom).

PenCom to the PFAs is what the CBN is to Banks and financial institutions in Nigeria. PenCom is saddled with the responsibilities, among others, of ensuring that all pension industry players, including the PFAs, carry out their functions as expected by law and sanction anyone found wanting.

They also ensure that pension assets are safeguarded and properly managed by all pension industry players through issuing guidelines on a regular basis and monitoring of the activities of the PFAs and other pension industry players, on a daily basis.

How Do the PFAs make their money?

As a business entity, it is expected that the PFAs get, in return for their services, some form of reward for the services they render.

Therefore, for their efforts, the PFAs earn their money or revenue basically in the following ways:

It is important to note that PFAs DO NOT take out funds from the contributions of their clients, which include RSA holders, but rather they charge what is known as “Fees” for carrying out their administrative functionss.

1. Fee income:

These fees are regulated by PenCom and are the same industry wide. They are in two categories:

a) Administrative Fees

b) Asset Based/Income Based fees

2. Investment Income:

PFAs are allowed to invest their funds in different investible products of their choice. The funds utilized for these kinds of Investment activities is the PFAs personal fund and not funds from the Pension Funds they manage on behalf of their clients.

PFAs, therefore invest in different kinds of Investment products on their own such as equities, bonds, money market instruments, etc. Income from these Investments (such as Dividend, coupon, interests, gains on disposal of assets, etc) also accrue to the PFA and they are also earned as revenue.

In conclusion, the two basic avenues PFAs generate income or make money for themselves are through charging fees for their services and also income earned from their own personal investment activities.


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