The National Pension Commission (PenCom) has announced new minimum capital requirement for Pension Fund Administrators (PFAs) and Pension Fund Custodians (PFCs), with timeline for compliance put at 31 December 2026.
According to the Commission as released in its X-handle weekend, the review is targeted at enhancing the financial stability, operational resilience, service delivery and long-term viability of the Pension Operators.
Under the new minimum capital requirement PFAs with AUM above N500 billion and above will require N20 billion +1 percent of (AUM-N500 billion), while PFAs with AUM below N500 billion will require N20 billion minimum capital. For new PFAs, the capital requirement for licensing is N20 billion.
PenCom said the Minimum capital for Special Purpose PFAs are -NPF Pensions Limited N30 billion and the Nigerian University Pension Management Company Limited N20 billion.
Meanwhile, capital requirement for existing PFCs is N25 billion + 0.1% of AUC, while the minimum requirement for a new PFC Licence is N25 billion
The capital requirement, according to the Commission was reviewed in line with global best practice, which ensures that capital is proportionate to the risk exposure of the Pension Fund Operators. The model aligns with the capital requirement with the Pension Asset Under Management (AUM) and Assets Under Custody (AUC) of the PFAs and PFCs respectively, PenCom said
The increased minimum capital seeks to strengthen the capacity of pension operators to effectively implement the lofty pension reform initiatives currently underway for the ultimate benefit of the esteemed Contributory Pension Scheme (CPS) retirees and contributors.
In the released guidelines signed by A. M. Saleem, director, Surveillance Department said the Commission has reviewed the minimum capital requirements for Pension Fund Administrators (PFAs) and Pension Fund Custodians (PFCs) pursuant to Sections 60 (1) (b), 62 (b) and 115 (1) of the Pension Reform Act (PRA) 2014.
The review it noted is to enhance the financial stability, operational resilience, 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 (AUM) and Assets Under Custody (AUC) of the PFAs and PFCs respectively.”
PenCom said 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 complex operating environment, macroeconomic pressures requiring deployment of adequate capital
“PFAs are therefore required to maintain adequate capital to sustain the achievements of the Contributory Pension Scheme (CPS) after 21 years of existence, support on-going pension reform initiatives aimed at positioning the Nigerian pension industry to respond to macroeconomic pressures, and deployment of adequate resources to effectively fund operations, improve service delivery and ensure long-term sustainability.”
The minimum capital requirement for PFC business had not been reviewed since it was established at N2 billion in 2004. The operating landscape of PFC business has evolved significantly over 21 years, marked by exponential growth in AUC and increased complexity of operational activities requiring deployment of robust technology, cybersecurity and staff welfare.
“These developments underscore the need to reassess the adequacy of the existing capital threshold to ensure continued financial stability and effective risk management in the operations of the PFC business.”
