The National Pension Commission (PenCom) has announced a fresh increase in the minimum capital requirements for Pension Fund Administrators (PFAs) and Pension Fund Custodians (PFCs), raising the thresholds to N20 billion and N25 billion, respectively.
The new directive, which forms part of the regulator’s “Pension Revolution 2.0,” was issued in a circular signed by the Director of the Surveillance Department, Mr. A. M. Saleem. The Commission has given PFAs and PFCs until December 31, 2026, to fully comply with the new requirements.
For PFAs, the new framework introduces a tiered capital structure based on Assets Under Management (AUM). Category A covers PFAs with AUM of N500 billion and above. They are required to maintain a minimum capital of N20 billion plus one per cent of their AUM. Category B includes PFAs with AUM below N500 billion, who must raise their capital base to N20 billion. Category C is reserved for special-purpose PFAs such as NPF Pensions Limited, which must now meet a capital threshold of N30 billion, while the Nigerian University Pension Management Company Limited has been assigned N20 billion.
PenCom also clarified that the minimum capital requirement for any new PFA licence has been pegged at N20 billion with immediate effect.
For PFCs, whose minimum capital requirement has remained at N2 billion since 2004, the Commission introduced a sharp review. The new requirement is now set at N25 billion plus 0.1 per cent of Assets Under Custody (AUC). PenCom further stated that any new licence for a PFC will now attract a minimum capital of N25 billion, effective immediately.
Explaining the rationale behind the upward review, PenCom said the adjustments were necessary to enhance the financial stability, operational resilience, and long-term viability of pension operators. Mr. Saleem said the new rules were benchmarked against global best practices, ensuring that capital requirements are now proportionate to the risks borne by operators in the industry.
“The review is to enhance financial stability and operational resilience and improve service delivery and long-term viability of the PFAs and PFCs,” he explained. “Since the last review of the minimum capital requirement for PFA business in April 2021, the pension industry has witnessed significant changes, including geometric growth in assets under management and a more complex operating environment. The new model aligns the capital requirement with the pension assets under management and custody of PFAs and PFCs.”
He added that the new requirements would also enable operators to withstand macroeconomic pressures while sustaining the achievements of Nigeria’s Contributory Pension Scheme, which has been in operation for 21 years.
PenCom said it will monitor compliance with the revised capital rules every two years, based on audited financial statements of pension operators. Any shortfall observed in a PFA’s or PFC’s capital position must be corrected within 90 days.
The capital review is one of several reforms under the Commission’s newly launched Pension Revolution 2.0. As part of the initiative, PenCom announced it will soon introduce a minimum pension guarantee, aimed at safeguarding retirees’ dignity and ensuring a decent standard of living.
Other reforms under Pension Revolution 2.0 include broadening pension investment options, integrating environmental, social, and governance (ESG) principles, and adjusting risk limits to allow for greater diversification and improved returns. The Commission also clarified regulatory definitions and opened the door to new investment classes such as reverse repos, gold receipts, securities lending, private placements, derivatives (for risk management purposes only), commodity-backed instruments, and agriculture investment funds.
Industry analysts believe the capital increase will drive consolidation in the pension industry, with smaller PFAs likely to consider mergers or acquisitions in order to meet the higher thresholds. Larger operators, particularly those in Category A with significant AUM, are expected to absorb the new requirements more easily.
By linking capital requirements to AUM and AUC, the new model ensures that operators managing higher volumes of pension assets maintain stronger financial buffers to safeguard contributors’ funds.
With over two decades since the introduction of the Contributory Pension Scheme, PenCom’s latest reforms reflect its attempt to strengthen the sector’s resilience in a period of economic volatility. The regulator maintains that the changes will not only improve service delivery to contributors but also ensure that pension funds remain sustainable and better managed in the long run.
