Regulatory Overhaul in Nigeria’s Pension Sector
The National Pension Commission (PenCom) has introduced significant changes to the capital requirements for Pension Fund Administrators (PFAs) and Pension Fund Custodians (PFCs), marking a major shift in Nigeria’s pension industry. The new regulations require PFAs to increase their capital from N5 billion to N20 billion, while PFCs must raise their minimum capital from N2 billion to N25 billion.
Operators have been given until December 31, 2026, to meet these new thresholds. PenCom stated that this move is aimed at enhancing financial stability and operational resilience, aligning with global best practices. This regulatory change is considered one of the most impactful in over two decades.
Capital Requirements for PFAs and PFCs
According to a circular titled ‘Revised Minimum Capital Requirements for Licensed Pension Fund Administrators and Pension Fund Custodians’, PFAs with Assets Under Management (AUM) of N500 billion or more are required to maintain a capital base of N20 billion plus 1% of the excess AUM beyond N500 billion. For PFAs with AUM below N500 billion, the new minimum capital requirement remains N20 billion.
Special Purpose PFAs, such as NPF Pensions Limited, must hold N30 billion, while the Nigerian University Pension Management Company Limited is required to maintain N20 billion.
For PFCs, the minimum capital requirement has been increased from N2 billion to N25 billion, plus 0.1% of Assets Under Custody (AUC). PenCom cited the exponential growth in assets under custody and the increasing complexity of operations—including technology deployment, cybersecurity, and staff welfare—as key drivers of the revision.
Regulatory Implications and Monitoring
Following the December 2026 deadline, PenCom will monitor the capital adequacy of all operators every two years based on their audited financial statements. Any identified shortfall must be addressed within 90 days.
The Commission also announced new rules allowing Nigerians abroad and foreign workers in Nigeria to contribute to pension funds in foreign currency. These contributions will result in retirement benefits paid in dollars, either through en bloc payment or programmed withdrawal. Contributors can choose to receive benefits in naira if they prefer.
Withdrawal Conditions and Eligibility
Under the revised guidelines, withdrawals can only be made six months after the initial contribution and “not more than twice in a year before retirement.” Contributors must provide notice of two working days before making such withdrawals. Foreign pension contributors who joined the scheme after the age of 50 will be eligible to access their full contributions as they wish, provided the PFA was notified one month before the withdrawal.
These changes are anchored in Sections 60(1)(b), 62(b), and 115(1) of the Pension Reform Act (PRA) 2014. PenCom emphasized that the review aims to support the long-term viability of pension operators, improve service delivery, and ensure the sustainability of the Contributory Pension Scheme (CPS), which has now been in operation for 21 years.
Implementation of Pension Arrears
In another development, PenCom assured pensioners across Nigeria that all outstanding pension increases approved by the Federal Government will be fully implemented before the end of the year, backed by a N758 billion bond released by President Bola Ahmed Tinubu.
The Director General of PenCom highlighted that the welfare of pensioners has become a top priority for the current administration. She stated that the protection of pensioners and the safeguarding of their benefits remain at the heart of PenCom’s mandate.
Impact on the Pension Sector
Experts suggest that the new capital base increase will drive investor confidence in the pension sector as part of the pension revolution 2.0. This move is expected to strengthen the sector’s ability to navigate macroeconomic pressures and deliver secure retirement benefits to millions of Nigerians.
