The National Pension Commission (PenCom) has set December 31, 2026, as the deadline for Pension Fund Administrators (PFAs) and Pension Fund Custodians (PFCs) to recapitalize to a new capital threshold, it was learned.
In a circular issued by the pension industry regulator, titled ‘Revised Minimum Capital Requirements for Licensed Pension Fund Administrators and Pension Fund Custodians,’ and cited by NATIONAL ECONOMY on Saturday, PFAs are now required to upgrade their capital from the current N5 billion to N20 billion within 14 months, while PFCs will upgrade their capital to N25 billion.
The pension industry started in 2004 with a N2 billion capital base but was raised to N5 billion in 2021 before a new increase to N20 billion, translating to a 300% increase in capitalization.
The circular, signed by the Director of the Surveillance Department of PenCom, A. M. Saleem, stated that 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 will require N20 billion + 1% of (AUM-N500 billion), while PFAs with AUM below N500 billion will require a minimum capital of N20 billion. For new PFAs, the capital requirement for licensing is N20 billion.
The regulator added that the minimum capital for Special Purpose PFAs is as follows: NPF Pensions Limited, N30 billion, and the Nigerian University Pension Management Company Limited, N20 billion.
Accordingly, PenCom stated that the revised minimum capital requirement for Licensed PFCs shall be based on Shareholders’ Funds, unimpaired by losses. Hence, the exercise for PFCs will be determined as follows: “N25 billion + 0.1% of AUC.” The minimum capital requirement for a new PFC license shall be N25 billion, effective immediately.
The timeline for compliance with the revised capital requirements for both Licensed PFAs and PFCs shall be December 31, 2026.
Stating that the review aims to enhance financial stability, operational resilience, improve service delivery, and long-term viability of the PFAs and PFCs, Saleem noted in the circular that the capital requirement was reviewed in line with global best practices, ensuring that capital is proportionate to the risk exposure of the Pension Fund Operator.
“The new model aligns the capital requirement with the Pension Assets 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 assets under management (AUM) and a complex operating environment, along with macroeconomic pressures requiring adequate capital deployment.
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.
