The National Pension Commission (PenCom) recently increased the Minimum Regulatory Capital (Shareholders’ Fund) requirements of Pension Fund Administrators (PFAS) from ₦1 billion to ₦5 billion. The PFAs were granted a 12- month transition period, effective 27 April, 2021 within which they were to meet the Minimum Regulatory Capital.
PenCom stated that the upward review of the minimum regulatory capital from ₦1 billion to ₦5 billion for PFAs became expedient as the value of pension assets under management and custody had grown exponentially by 244%; from N3 trillion in 2012 (when the previous recapitalization was done) to ₦12.29 trillion (as at December 31, 2020).
Furthermore, PenCom stated that sustained growth in assets implies greater fiduciary responsibilities that require more operational capacity by the PFAs. In addition, the total number of contributors had increased to 9.33 million as at December 31, 2020.
As a result of the growth in pension assets and contributions, increased capital injection into the PFAs became necessary in order to maintain service standards, improve the capacity of PFAs in terms of operational efficiency and effectiveness and increase growth potentials of the pension industry. Furthermore, an increase in the Shareholders’ Fund will enable PFAs to employ and retain skilled staff and ensure the adequacy of resources to fund operational requirements (e.g., ICT infrastructure, branch office expansion) and activities
Meanwhile, PenCom is monitoring the process closely and aware that Pension Operators are evaluating the various options open to them to attain the new Minimum Regulatory Capital requirement. Whichever option a PFA chooses, will be subjected to the Commission’s approval processes. It is however important to note that Pension Fund Custodians (PFCs) are not affected by the recapitalization exercise. The PFCs are wholly owned by big licensed financial institutions and are adequately capitalized.