Regulatory Changes in Nigeria’s Pension Sector
The National Pension Commission (PenCom) has made significant regulatory changes in the Nigerian pension sector, raising the capital requirements for Pension Fund Administrators (PFAs) and Pension Fund Custodians (PFCs). This move is part of a broader effort to enhance financial stability and operational resilience within the industry.
Capital Requirements for PFAs and PFCs
The new capital threshold for PFAs has been increased from N5 billion to N20 billion. Operators are given until December 31, 2026, to meet this requirement. For PFAs with Assets Under Management (AUM) of N500 billion or more, they must now maintain a capital base of N20 billion plus 1% of the excess AUM beyond N500 billion. PFAs with AUM below N500 billion are also required to meet the new N20 billion minimum capital.
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. These changes are aimed at aligning the capital requirements with global best practices, ensuring that capital is proportionate to the risk exposure of the Pension Fund Operator.
For PFCs, the minimum capital requirement has been raised from N2 billion, which had remained unchanged since 2004, to N25 billion plus 0.1% of Assets Under Custody (AUC). The Commission 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.
Monitoring and Compliance
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. This ensures continued financial stability and effective risk management.
Approval of Foreign Currency Pension Contributions
In another regulatory development, PenCom approved new rules allowing Nigerians abroad and foreign workers in Nigeria to contribute to pension funds in foreign currency. These regulations apply to Nigerians living and working abroad and employees of foreign companies and international organizations in Nigeria not covered by the Pension Reform Act 2014.
Foreign currency pension contributors will receive their retirement benefits in dollars, either through en bloc payment or programmed withdrawal. They can access their pensions upon reaching the age of 50 or on health grounds. Contributors must provide completed withdrawal forms, valid identification documents, and any other documentation specified by PenCom.
Those preferring to receive benefits in naira will be allowed to do so. For deceased or missing persons, the pension fund administrator will pay benefits according to the revised regulation for the administration of retirement and terminal benefits.
New withdrawal conditions have also been introduced for foreign currency pension contributors. Withdrawals can only be made six months after the initial contribution and “not more than twice in a year before retirement.” Contributors must give notice of two working days before making such withdrawals.
A foreign pension contributor who joined the scheme after the age of 50 years shall be eligible to access their full contributions as they wish, provided the PFA was notified one month before such withdrawal.
Implementation of Pension Arrears
PenCom has 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 emphasized the importance of protecting pensioners’ benefits and ensuring their dignity after years of service.
This commitment reflects PenCom’s dedication to aligning Nigeria’s pension industry with global standards, ensuring that operators are well-capitalized to navigate macroeconomic pressures and deliver secure retirement benefits to millions of Nigerians.
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 regulatory shift marks one of the most significant changes in Nigeria’s pension industry in over two decades.
