PenCom Plans Fresh Reforms To Safeguard Pension Savings

The National Pension Commission (PenCom) has announced plans to unveil a revised pension investment regulation that will expand opportunities in alternative assets and deliver better real returns to contributors under the Contributory Pension Scheme (CPS).

The director general of PenCom, Ms. Omolola Oloworaran, made the disclosure during a courtesy visit to president of the Trade Union Congress of Nigeria (TUC), Comrade Festus Osifo, in Abuja, the commission stated on Wednesday.

The current investment framework for pension funds under PenCom specifies the maximum percentage of total pension fund assets that can be invested in various asset classes to ensure diversification and protection of pension savings.

Under this framework, Pension funds can invest up to 100 per cent in Federal Government Bonds, which are considered the safest asset class.

Up to 20 per cent of pension fund assets can be invested in State Government Bonds, with a limit of 2% in bonds issued by any one state.

Corporate Bonds and debt instruments, including real estate investment trusts (REITs), mortgages, and asset-backed securities can make up to 30% of the pension fund. However, investments are capped at 2.5% of total assets in bonds by a single corporate entity or any one issue.

Money Market Instruments can constitute up to 35% of the portfolio, with issuer-specific limits ranging from 1% to 4% depending on risk ratings.

Ordinary shares (equities) have a maximum allocation of 25%, with issuer limits varying by risk rating from 1% to 3% of the issued capital.

Investment in open- and closed-end funds is capped at 5%, and each issuer or fund is subject to a 0.5% limit on total assets.

These limits are designed to balance the need for safety, liquidity, and returns in managing pension funds, ensuring that retirement savings are protected while offering the growth potential.
Ololoworaran explained that the initiative forms part of ongoing reforms to address the erosion of value in pension savings and mitigate the impact of inflation on pension assets.

She added that PenCom is working with the Central Bank of Nigeria (CBN) and the Federal Ministry of Finance on frameworks that will allow pension investments in naira but generate returns in dollars, thereby safeguarding retirement funds against currency risks.

The pension DG further revealed that the Commission would soon introduce a minimum pension for all retirees under the CPS, supported by President Bola Tinubu’s recent approval of a N758 billion bond to finance the Pension Protection Fund (PPF).

The PenCom boss reaffirmed the Commission’s commitment to deepening collaboration with organised labour to strengthen the CPS and urged the TUC to support efforts to enforce employer compliance with the Pension Reform Act (PRA) 2014, which mandates timely remittance of workers’ contributions.

TUC President Osifo commended PenCom’s professionalism and efficiency, while pledging the union’s support in driving compliance.

He also called for a review of the PRA to introduce more flexibility in pension fund investments, ensuring workers’ savings are better shielded from inflation and exchange rate pressures.