**PenCom Raises Capital Thresholds for Pension Fund Operators to Strengthen Financial Capacity**
The National Pension Commission (PenCom) has announced a significant increase in the minimum capital requirements for Pension Fund Administrators (PFAs) and Pension Fund Custodians (PFCs). This move is aimed at strengthening the financial capacity of operators and aligning with the rapid growth in pension assets.
In a revised circular signed by A. M. Saleem, Director of Surveillance, PenCom raised the capital threshold for PFAs from N5 billion to N20 billion. Meanwhile, the capital requirement for PFCs was increased from N2 billion to N25 billion. Pension operators are given until December 31, 2026, to comply with these new regulations.
### Revised Capital Requirements for PFAs and PFCs
Under the updated framework:
– **PFAs with Assets Under Management (AUM) of N500 billion and above** must maintain a capital base of N20 billion plus 1% of their AUM.
– **PFAs with less than N500 billion AUM** are required to hold a fixed minimum capital of N20 billion.
– **PFCs** must maintain a minimum capital of N25 billion, complemented by an additional 0.1% of their Assets Under Custody (AUC).
### Rationale Behind the Capital Increase
PenCom explained that the capital requirement for custodians had not been reviewed since 2004, despite exponential growth in pension assets and increasing operational complexity.
The Commission highlighted that the existing 21-year-old framework no longer reflects the current realities of the pension industry. In particular, there is a growing need for greater investment in technology, cybersecurity, and staff welfare to ensure stable and secure operations.
The circular emphasized the importance of reassessing the adequacy of the capital threshold to support continued financial stability and effective risk management for PFCs.
> “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 circular stated.
### Ongoing Monitoring and Compliance
PenCom also stated that capital adequacy of all operators would be monitored every two years based on their audited financial statements. Any identified capital shortfalls must be addressed by the operators within 90 days to remain compliant.
This new regulatory update marks a crucial step in fortifying Nigeria’s pension industry and ensuring operators are well-equipped to manage growing pension assets sustainably and securely.
https://tribuneonlineng.com/pension-industry-faces-shake-up-as-pencom-tightens-oversight/