The National Pension Commission (PenCom) has announced a sweeping revision to the capital requirements for Pension Fund Administrators (PFAs) and Pension Fund Custodians (PFCs), raising the minimum threshold for PFAs tenfold, from N2 billion to N20 billion.
The move, aimed at strengthening financial stability and operational resilience, marks one of the most significant regulatory shifts in Nigeria’s pension industry in over two decades.
In a circular titled “Revised Minimum Capital Requirements for Licensed Pension Fund Administrators and Pension Fund Custodians”, PenCom stated that PFAs with Assets Under Management (AUM) of N500 billion and above must now maintain a capital base of N20 billion plus 1% of the excess AUM beyond N500 billion.
PFAs with AUM below N500 billion are also required to meet the new N20 billion minimum. Special Purpose PFAs, such as NPF Pensions Limited, must hold N30 billion, while the Nigerian University Pension Management Company Limited is required to maintain N20 billion.
“The capital requirement was reviewed in line with global best practice, which ensures that capital is proportionate to the risk exposure of the Pension Fund Operator,” PenCom stated. “The new model aligned the capital requirement with the Pension Asset Under Management (AUM) and Assets Under Custody (AUC) of the PFAs and PFCs respectively.”
Custodians Face New N25 Billion Threshold
For Pension Fund Custodians (PFCs), the minimum capital requirement has been raised from N2 billion, unchanged since 2004, to N25 billion plus 0.1% of AUC.
The Commission cited the exponential growth in assets under custody and the increasing complexity of operations, including technology deployment, cybersecurity, and staff welfare, as key drivers of the revision.
“The operating landscape of PFC business has evolved significantly over 21 years,” the circular noted. “These developments underscore the need to reassess the adequacy of the existing capital threshold to ensure continued financial stability and effective risk management.”
The revised capital requirements for both PFAs and PFCs will take effect immediately for new licenses, while existing operators have until December 31, 2026, to comply.
PenCom will monitor compliance every two years based on audited financial statements, and any shortfall must be rectified within 90 days.
Reform to Sustain Pension Scheme Growth
PenCom emphasized that the review is anchored in Sections 60(1)(b), 62(b), and 115(1) of the Pension Reform Act (PRA) 2014. It aims to support the long-term viability of pension operators, improve service delivery, and ensure the sustainability of the Contributory Pension Scheme (CPS), which has now been in operation for 21 years.
“PFAs are therefore required to maintain adequate capital to sustain the achievements of the CPS, support ongoing pension reform initiatives, and deploy adequate resources to effectively fund operations,” PenCom stated.
The revised capital will be measured as Shareholders’ Fund unimpaired by losses, less the Statutory Reserve Fund.
The announcement signals PenCom’s commitment to aligning Nigeria’s pension industry with global standards, ensuring that operators are well-capitalized to navigate macroeconomic pressures and deliver secure retirement benefits to millions of Nigerians.
What You Should Know
- This development came barely 24 hours after PenCom unveiled a revised regulation that allows pension funds to gain exposure to gold through tradable Gold Receipts listed on Securities and Exchange Commission (SEC)-recognised exchanges.
- This innovation enables pension fund administrators (PFAs) to invest in gold without the complexities of physical storage, offering a secure and liquid alternative asset class.
- Gold Receipts are part of a broader suite of instruments introduced under PenCom’s updated investment guidelines aimed at enhancing diversification, boosting returns, and minimizing concentration risks.
