The National Pension Commission (PenCom) has set December 31, 2026, as the deadline for the Pension Fund Adminstrators (PFAs) and Pension Fund Custodians (PFCs) to recapitalise to a new capital threshold of N20bn.
In a circular issued by the pension industry regulator titled ‘Revised Minimum Capital Requirements for Licensed Pension Fund Administrators and Pension Fund Custodians’
and sighted by LEADERSHIP on Saturday, PFAs are now required to upgrade their capital from the current N5billion to N20billion under 14 months while PFCs will now upgrade capital to N25billion.
The pension industry started in 2004 with N2billion capital base but was raised to N5billion in 2021 before the latest increase to N20billion, translating to 300 per cent increase in capitalisation.
The circular signed by the director, Surveillance Department of PenCom, A. M. Saleem said, the commission has reviewed the minimum capital requirements for PFAs and PFCs pursuant to Sections 60 (1) (b), 62 (b) and 115 (1) of the Pension Reforms Act (PRA) 2014.
To this end, PFAs with assets under management (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.
The regulator added that the minimum capital for Special Purpose PFAs are – NPF Pensions Limited N30 billion and the Nigerian University Pension Management Company Limited N20 billion.
Accordingly, PenCom said the revised minimum capital requirement for Licensed PFCs shall be based on Shareholders’ Fund, unimpaired by losses.
Hence, it noted that the exercise for PFCs will be determined as follows: “N25 billion + 0.1% of AUC. The minimum capital requirement for new PFC License shall be N25 billion with immediate effect. The timeline for compliance with the revised capital requirements for both Licensed PFAs and PFCs shall be 31 December 2026.”
Stating that the review was to enhance the financial stability, operational resilience, improve service delivery and long-term viability of the PFAs and PFCs, Saleem, in the circular, noted that 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,” the regulator said.
Since the last review of the minimum capital requirement for PFA business in April 2021, Saleem said, the pension industry has witnessed significant changes in terms of the geometric growth of the assets under management (AUM) and complex operating environment, macroeconomic pressures requiring deployment of adequate capital.
The revised capital requirement would subsequently be monitored by the commission every two years based on the audited financial statements of the Pension Fund Operator and any shortfall shall be made up within 90 days, it pointed out.
