PenCom increases the Capital Requirement for Pension Fund Administrators (PFAs) – PensionNigeria

PenCom increases the Capital Requirement for Pension Fund Administrators (PFAs)

The National Pension Commission (PenCom), the regulator for pension in Nigeria, has increased the minimum share capital requirement for licensed Pension Fund Administrators (PFAs). This is basically the amount that is required to finance the start-up of a PFA as well as meet the requirements for commencement of business of a PFA.

After preliminary evaluation of an application to start a PFA and before the issuance of an Approval in Principle (AIP), the applicant shall now be required to submit the evidence of deposit of a minimum capital of N5,000,000,000 (five billion Naira only) in an escrow account in any licensed commercial bank in Nigeria. Once the AIP is granted the amount deposited will be used to finance the start-up of the PFA as well as meet the requirements for commencement of business of the PFA.

For existing PFAs, PenCom gave them a 12-month transition period, effective 27 April 2021, within which the PFAs are to meet the new minimum capital requirement. Any PFA unable to meet the requirement would normally have their license revoked, PensionNigeria will continue to track this development.

The minimum share capital requirement for licensed Pension Fund Administrators (PFAs) has been N1,000,000,000 (one billion Naira only) since 2012 (its was announced on 31 May, 2011 and effective from 30 June, 2012.

We have long been expecting PenCom to increase it considering inflation and devaluation of Naira. PenCom said “the increase in the minimum regulatory capital is necessitated by the need to improve the capacity of PFAs, in terms of operational efficiency and effectiveness as well as service delivery.”

Below are extracts from the letter sent by PenCom to the Managing Directors/Chief Executive Officers of all licensed Pension Fund Operators. The letter was signed by the Head of Surveillance Department of the National Pension Commission (PenCom) and dated 29 April 2021.

“The Board of the Commission, at its 48th Meeting on 27 April 2021, approved the increase of the Minimum Regulatory Capital (Share holders’ Fund) requirement for PFAs, from the current One Billion Naira (N1,000,000,000) to Five Billion Naira (N5,000,000,000), unimpaired by losses.”

“The increase in the minimum regulatory capital is necessitated by the need to improve the capacity of PFAs, in terms of operational efficiency and effectiveness as well as service delivery.”

“The Board also approved a 12-month transition period, effective 27 April 2021, within which PFAs are to meet the new minimum capital requirement.”

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