The National Pension Commission (PenCom) has announced a new deadline of December 31, 2026, for Pension Fund Administrators (PFAs) and Pension Fund Custodians (PFCs) to meet updated capital requirements through recapitalization.
According to a recent circular titled ‘Revised Minimum Capital Requirements for Licensed Pension Fund Administrators and Pension Fund Custodians,’ obtained by LEADERSHIP, PFAs must increase their capital base from the existing N5 billion to N20 billion within the next 14 months. Meanwhile, PFCs are mandated to raise their capital to N25 billion.
Since its inception in 2004 with a capital base of N2 billion, the pension sector has progressively increased its capital thresholds, moving to N5 billion in 2021 before this latest substantial hike to N20 billion-representing a 300% escalation in required capitalization.
The directive, signed by A. M. Saleem, Director of PenCom’s Surveillance Department, highlights that the commission’s review of assets/” title=”Stakeholders Demand Enhanced Safeguards for N24.6 Trillion Pension and N3.3 Trillion Insurance …”>minimum capital standards for PFAs and PFCs is grounded in Sections 60(1)(b), 62(b), and 115(1) of the Pension Reforms Act (PRA) 2014.
Under the new framework, PFAs managing assets exceeding N500 billion must maintain a capital base of N20 billion plus an additional 1% of the amount by which their assets under management (AUM) surpass N500 billion. PFAs with AUM below N500 billion are required to hold a minimum capital of N20 billion. New entrants seeking PFA licenses must also meet the N20 billion capital threshold.
Specialized PFAs have distinct capital requirements: NPF Pensions Limited is set at N30 billion, while the Nigerian University Pension Management Company Limited must maintain N20 billion.
For PFCs, the revised minimum capital is calculated based on shareholders’ funds, excluding any losses. The formula is N25 billion plus 0.1% of Assets Under Custody (AUC). New PFC licenses will require an immediate minimum capital of N25 billion.
Both PFAs and PFCs are expected to comply with these updated capital requirements by the end of 2026.
Saleem emphasized that this capital review is designed to bolster financial soundness, operational durability, and service quality, ensuring the long-term sustainability of pension operators. The adjustments align with international standards, tailoring capital levels to the risk profiles associated with pension fund operations.
“This updated model links capital requirements directly to the Pension Assets Under Management (AUM) for PFAs and Assets Under Custody (AUC) for PFCs,” the commission explained.
Since the last capital review in April 2021, the pension sector has experienced rapid growth in AUM alongside increasingly complex market conditions and macroeconomic challenges, necessitating stronger capital buffers.
PenCom will conduct biennial assessments of capital adequacy based on audited financial reports from pension operators. Any deficiencies identified must be rectified within 90 days to maintain compliance.
