In furtherance of its sustained initiatives to strengthen operators in the nation’s pension system, the National Pension Commission (PenCom) has increased the minimum capital requirements of Pension Fund Administrators (PFAs) and Pension Fund Custodians (PFCs) to N20bn and N25bn, respectively.
The commission, in its just issued circular on the capital requirements of the operators, which is a component of its Pension Revolution 2.0, also sets a deadline of 31 December 2026 for them to meet the new capital requirements.
Under the new directive, three categories of operators were created, with Category A consisting of PFAs with Assets Under Management of N500bn and above, who are expected to raise a minimum capital of N20bn + one per cent of AUM, N500bn; the Category B comprises PFAs with AUM below N500bn, who are expected to raise their capital base to N20bn.
Also, those in Category C are special-purpose PFAs such as NPF Pensions Limited, whose minimum capital was pegged at N30bn, and the Nigerian University Pension Management Company Limited, whose minimum capital was fixed at N20bn
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Also, the minimum capital requirement for a new PFC licence shall be N25bn, effective immediately.
Justifying the upward review of the capital requirements of the operators, the commission’s Director of the Surveillance Department, A.M. Saleem, who signed the circular, stated: “The review is to enhance the financial stability and operational resilience and improve service delivery and long-term viability of the PFAs and PFCs. 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. The new model aligned the capital requirement with the Pension Asset Under Management and Assets Under Custody of the PFAs and PFCs, respectively.
“Since the last review of the minimum capital requirement for PFA business in April 2021, the pension industry has witnessed significant changes in terms of the geometric growth of the AUM and the complex operating environment, with macroeconomic pressures requiring the deployment of adequate capital. PFAs are therefore required to maintain adequate capital to sustain the achievements of the Contributory Pension Scheme after 21 years of existence, support ongoing pension reform initiatives aimed at positioning the Nigerian pension industry to respond to macroeconomic pressures, and deploy adequate resources to effectively fund operations, improve service delivery and ensure long-term sustainability”, he added.
The PenCom management also maintained that the revised capital requirement would be monitored by the commission every two years based on the audited financial statements of the Pension Fund Operator, and that any shortfall would be made up by the PFO within 90 days.
During the week, the commission introduced the Pension Revolution 2.0, which through the implementation it will also introduce the minimum pension guarantee to protect retirees’ savings and decent standard of living after retirement.
It would be recalled the PenCom had in April 2021 last reviewed the minimum capital requirement for PFAs from N1bn to N5bn.
