Aduragbemi Omiyale
By Aduragbemi Omiyale
Pension Fund Administrators (PFAs) operating in the country have been mandated to increase their Minimum Regulatory Capital (shareholders’ fund) requirements to N5 billion from N1 billion.
This directive was given by the National Pension Commission (PenCom), the agency approved by the government to regulate the pension industry.
The operators have one year to meet up or have their operational licences withdrawn.
A circular from the agency said the PFAs have till April 2022 to recapitalise.
PenCom explained that this exercise became necessary as a result of the 244 per cent growth in the value of pension assets under management and custody from N3 trillion in 2012 to N12.3 trillion in 2020.
The agency said when this is put into consideration and also the increase in the total number of contributors to 9.33 million, PFAs must shore up their capital base to accommodate the exponential growth.
In the circular, PenCom said it would monitor the exercise, noting that it would have to approve any option a PFA chooses to meet up with the new requirements.
“The National Pension Commission (PenCom) recently increased the Minimum Regulatory Capital (shareholders’ fund) requirements of Pension Fund Administrators (PFAs) from N1 billion to N5 billion.
The PFAs were granted a 12-month transition period, effective April 27, 2021, within which they were to meet the Minimum Regulatory Capital.
“PenCom stated that the upward review of the Minimum Regulatory Capital from N1 billion to N5 billion for PFAs became expedient as the value of pension assets under management and custody had grown exponentially by 244 per cent; from N3 trillion in 2012 (when the previous recapitalisation was done) to N12.29 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.
“Whichever option a PFA chooses will be subjected to the commission’s approval process. It is, however, important to note that Pension Fund Custodians (PFCs) are not affected by the recapitalisation exercise. The PFCs are wholly owned by big licensed financial institutions and are adequately capitalised,” the circular read.
