By Joseph Inokotong
Copyright tribuneonlineng
Raises capital threshold for operators to N20bn, N25bn
The National Pension Commission (PenCom) has announced a major increase in the minimum capital requirements for Pension Fund Administrators (PFAs) and Pension Fund Custodians (PFCs), in a bid to strengthen operators’ financial capacity and align with the rapid growth in pension assets.
In a revised circular signed by A.M. Saleem, Director of Surveillance, the capital threshold for PFAs has been raised from N5 billion to N20 billion, while that of PFCs was increased from N2 billion to N25 billion.
Pension operators have until December 31, 2026, to comply with the new requirements.
Under the revised framework, PFAs with Assets Under Management (AUM) of N500 billion and above must maintain a capital base of N20 billion plus 1 percent of their AUM.
Those with less than N500 billion in AUM are required to hold a fixed minimum capital of N20 billion.
For custodians, the new N25 billion base will be complemented by an additional 0.1 percent of their Assets Under Custody (AUC).
PenCom explained that the capital requirement for custodians had not been reviewed since 2004, despite the exponential growth in pension assets and the increasing complexity of operations.
The Commission pointed out that the 21-year-old framework no longer reflects the current realities of the industry, where greater investment in technology, cybersecurity, and staff welfare is needed.
“These developments underscore the need to reassess the adequacy of the existing capital threshold to ensure continued financial stability and effective risk management in the operations of the PFC business,” the circular stated.
The circular articulates the operational necessity for the change, stating that: “The operating landscape of PFC business has evolved significantly over 21 years, marked by exponential growth in AUC and increased complexity of operational activities requiring deployment of robust technology, cybersecurity and staff welfare.”
“These developments underscore the need to reassess the adequacy of the existing capital threshold to ensure continued financial stability and effective risk management in the operations of the PFC business.”
The Commission stated that the capital adequacy of all operators would subsequently be monitored every two years, based on their audited financial statements, and any identified shortfall must be addressed within 90 days.
