The National Pension Commission of Nigeria, PenCom, has announced a significant increase in the minimum capital requirements for Pension Fund Administrators and Pension Fund Custodians. The new threshold has been raised from ₦2 billion to ₦20 billion for Pension Fund Administrators, and to ₦25 billion plus 0.1% of Assets Under Custody for Pension Fund Custodians.
According to a circular released by PenCom, the revision aims to strengthen financial stability and operational resilience in the pension industry. The move is also intended to align the capital requirements with global best practices, ensuring that capital is proportionate to the risk exposure of pension fund operators. For Pension Fund Administrators with Assets Under Management of ₦500 billion and above, the capital base must now be ₦20 billion plus 1% of the excess Assets Under Management beyond ₦500 billion.
The new requirements apply to all Pension Fund Administrators, including Special Purpose PFAs, which must hold a minimum of ₦30 billion. The Nigerian University Pension Management Company Limited, on the other hand, is required to maintain a capital base of ₦20 billion. PenCom stated that the capital requirement was reviewed to ensure that it is proportionate to the risk exposure of the Pension Fund Operator, and to support the long-term viability of pension operators.
The increased capital requirements are a response to the exponential growth in assets under custody and the increasing complexity of operations in the pension industry. This includes the deployment of technology, cybersecurity, and staff welfare. The Commission noted that the operating landscape of the Pension Fund Custodians’ business has evolved significantly over the past 21 years, underscoring the need to reassess the adequacy of the existing capital threshold.
The revised capital requirements 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. The review is anchored in the Pension Reform Act of 2014 and aims to improve service delivery and ensure the sustainability of the Contributory Pension Scheme, which has been in operation for 21 years.
The increased capital requirements are expected to have a significant impact on the pension industry in Nigeria, as they will help to ensure the financial stability and operational resilience of pension fund operators. This, in turn, will support the long-term viability of the Contributory Pension Scheme and improve service delivery to pensioners. With the new requirements in place, PenCom is poised to continue playing a critical role in regulating and supervising the pension industry in Nigeria.
