The National Pension Commission has issued new guidelines prohibiting substantial cross-shareholding among licensed Pension Fund Operators.

Released on Friday and effective immediately, the guidelines aim to enhance transparency, strengthen governance, and safeguard pension assets.

PenCom defines significant cross-shareholding as a scenario in which a major shareholder in one LPFO:
a) acquires or seeks to acquire a significant stake in another LPFO, or
b) becomes legally entitled, directly or indirectly, to hold such a stake in another pension entity. This may occur through means such as debt-to-equity conversion, legal operations like transmission on death, or other forms of vesting.

The regulator further noted that significant cross-shareholding could also result from mergers or acquisitions outside the pension sector, where individuals or entities end up holding five percent or more in multiple LPFOs.

PenCom said, “No person shall hold, or continue to hold, or otherwise enter into any arrangement or agreement that would result in holding or continuing to hold a significant cross-shareholding.

For the purpose of determining whether a person holds a significant cross-shareholding, the Commission may aggregate the shareholdings of such person with those of its related persons.

“The restriction on significant cross-shareholding applies regardless of how the stake is acquired, whether through mergers, acquisitions within or outside the pension sector, direct investment, new licensing, or other means whatsoever. The goal is to ensure that no shareholder or applicant company holds a direct or indirect ownership/shareholding of five per cent or more in more than one LPFO. This includes affiliates, holding companies, subsidiaries, and related parties of the shareholder, as well as its directors, employees, spouses, and family members of the shareholder or the new applicant company.”

For cases where significant cross-shareholding already exists, PenCom has provided a six-month transition period for affected parties to comply with the new guidelines.

“Any person who, on the effective date, holds a significant cross-shareholding shall, within [six months] from the effective date, divest such portion of its shareholding as is necessary to comply with the restriction on significant cross-shareholding as provided in these guidelines. Any person who, by operation of law, after the effective date, comes to hold a significant cross-shareholding shall, within [six months] from such vesting, divest such portion of its shareholding as is necessary to comply with the restriction on significant cross-shareholding as provided in these guidelines,” stated the new regulations.

PenCom has also imposed sanctions on defaulting Pension Fund Operators (PFOs), declaring that any agreement or arrangement resulting in significant cross-shareholding will be null and void. Additionally, any shares acquired or held in violation of the guidelines will carry no rights or privileges, including voting rights, dividends, or participation in the governance of the pension firm.

“The LPFO in which such shares are purported to be held shall not recognise or record such shares in favour of the significant shareholder.

“Appropriate administrative penalties shall be imposed for violation of the provisions of these Guidelines in line with the Commission’s Framework for Regime of Sanctions and Penalties,” added PenCom.

PenCom also issued a circular on Centralised or Shared Services Arrangements (CSSAs) with parent, holding, group entities, or other related subsidiary companies. The guidelines for PFOs aim to strengthen governance by ensuring that CSSAs are conducted at arm’s length, with competitive pricing that reflects the services provided and clearly defined roles and responsibilities.

Effective immediately, the circular allows Pension Fund Operators to enter into Centralised or Shared Services Arrangements with their parent, holding, group entities, or other related subsidiaries in areas such as human resources, information security and ICT services, marketing and communications, company secretariat and legal advisory services, administration/facilities (including office accommodation, cleaning, and security), procurement, and any other services approved by PenCom.

However, these CSSAs must comply with PenCom rules and must not compromise the operational independence of the LPFO, create dependency risks, or impair fiduciary obligations to Retirement Savings Account holders.

In another key development, PenCom has inaugurated the Pension Industry Leadership Council to deepen reforms and strengthen Nigeria’s pension sector. Speaking at the inauguration in Abuja, PenCom’s Director-General, Ms. Omolola Oloworaran, explained that the council is designed to provide collective leadership and coordination, akin to the Bankers’ Committee in the financial system.

Regarding the N758 billion pension bond approved earlier this year by the Federal Government to settle outstanding pension liabilities, the Director of PenCom’s Contribution and Bond Redemption Department, Usman Musa, disclosed at a press briefing that the process has begun and is progressing rapidly following approvals from the Federal Executive Council and the National Assembly.

Speaking at the press conference, Musa said, “As the DG has mentioned, the process of issuance of the N758bn bond has commenced. In fact, we have gone very fast. We are hopeful that by the end of this month, or at least the first week of October, we will start receiving the process. And once that is done, the bond is ready to go; we will commence payment.”

This development is expected to provide relief for pensioners who have been awaiting payments since they were first announced.