By Chris Ebong
Copyright independent
… Pension Market May Turn Oligopoly, Exploitative – Expert
LAGOS – The National Pension Commission (PenCom) has mandated the pension fund administrators (PFAs) with over N500billion Asset under Management to recapitalise to the tune of N25billion from the current N5billion they are running with.
This was stated in a circular released over the weekend by the Commission and spotted by the Daily Independent.
The exercise which has commenced will last for 14 months ending December 2026.
According to the circular PFAs with less than N500billion would have to recapitalise to N20billion while the pension fund custodians (PFCs) would have to raise their capital base to N25billion.
The circular titled ‘Revised Minimum Cap-ital Requirements for Licensed Pension Fund Administrators and Pension Fund Custodians reads: “PFAs are now required to upgrade their capital from the current N5billion to N20billion under 14 months while PFCs will now upgrade capital to N25billion.”
Alhaji A. M. Saleem, the director, Surveil-lance Department of PenCom, who signed the circular noted 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 man-agement (AuM) of N500 billion and above will require N20 billion +1 percent of (AUM-N500 billion), while PFAs with AuM below N500 bil-lion will require N20 billion minimum capital. The minimum capital requirement for licensing a new PFA is N20billion.”
The regulator added that the minimum cap-ital for Special Purpose PFAs such as – NPF Pensions Limited has been raised to N30 billion while that of the Nigerian University Pension Management Company Limited would go for N20 billion.
Accordingly, PenCom said the revised min-imum capital requirement for Licensed PFCs shall be based on Shareholders’ Fund, unim-paired by losses. Hence, it noted that the exercise for PFCs would be determined as follows: “N25 billion + 0.1percent of Assets under Custody (AuC). The minimum capital requirement for new PFC License shall be N25billion with im-mediate effect.
The timeline for compliance with the revised capital requirements for both Licensed PFAs and PFCs shall be 31 December 2026.”
The Commission stated that the review was to enhance the financial stability, operational resilience, improve service delivery and long-term viability of the PFAs and PFCs, Saleem, noted that the capital requirement was reviewed in line with global best practice, which ensures that capital is proportionate to the risk exposure of the Pension Fund Operator.
“The new model aligned the capital require-ment with the Pension Asset under Management (AuM) and Assets under Custody (AuC) of the PFAs and PFCs respectively,” the regulator said.
Since the last review of the minimum capi-tal requirement for PFA business in April 2021, Saleem said, the pension industry has witnessed significant changes in terms of the geometric growth of the assets under management (AuM) and complex operating environment, macro-economic pressures requiring deployment of adequate capital.
The revised capital requirement, he said, would subsequently be monitored by the Com-mission every two years based on the audited financial statements of the Pension Fund Oper-ators and any shortfall shall be made up within 90 days.
Peter Adediji, Pension expert and publisher, Peninscope Magazine viewed that the current capital prescription by the PenCom would be subject to abuse by the big players in the sector.
“The market will turn to oligopoly making the few operators more powerful to be controlled. Agitation of exploitation will follow.” He said.
Effort by our correspondent to reach most of the CEOs on the issue proved abortive as they neither picked calls nor responded to their WhatsApp chats.
