The National Pension Commission has authorised Pension Fund Administrators to appoint external auditors and actuaries for Approved Existing Schemes and Additional Benefits Schemes.

The directive was contained in a recent circular issued to all licensed PFAs and signed by the Director of the Surveillance Department, A. M. Saleem.

PenCom explained that the move followed the failure of trustees and sponsor companies of the affected pension schemes to appoint the required external auditors and actuaries, as stipulated by law.

Section 50(2) of the Pension Reform Act 2014 states that “an employer operating any Defined Benefits Scheme shall undertake, at the end of every financial year, an actuarial valuation to determine the adequacy of its pension fund assets.”

Also, Section 2.1(3) of the Commission’s Framework for the Establishment of ABS requires Trustees and Sponsor Companies of AES/ABS to appoint an actuarial firm and an external auditor to carry out actuarial valuations and audits of the schemes, respectively, in line with Sections 50(2) and 66(2) of the PRA 2014.

However, PenCom said its supervisory oversight of PFAs showed that most Trustees and Sponsor Companies of AES/ABS are in default, having failed to appoint actuarial firms and external auditors to carry out the required valuations and audits.

“The failure of the Trustees/Sponsor Companies to appoint the auditors and actuaries poses a risk to the going concern of the schemes’ ability to meet obligations to members and is a violation of the PRA 2014 and regulations issued by the Commission,” said PenCom.

The regulator laid down new guidelines to ensure compliance, stating, “(i) Two months before the end of each financial year (31 December), the PFA or the Lead PFA of the AES/ABS shall notify the Trustees/Sponsor Companies to appoint an external auditor and an actuary. (ii) The PFA shall send a reminder if the Trustee/Sponsor Company has not made the appointment within 21 days of receiving the PFA’s letter. The reminder will state that if no formal response is received within five working days, the PFA will proceed to appoint an external auditor and actuary and submit the terms of engagement to the Commission for approval.

“iii) Upon receipt of approval from the Commission, the PFA shall notify the Trustee or Sponsor Companies of the terms of engagement. (iv) The PFA shall also inform the Trustee or Sponsor Companies that the audit/actuarial fees shall be charged to the related scheme under the management of the PFA after obtaining the Commission’s approval.”