The National Pension Commission has raised the minimum capital requirements for Pension Fund Administrators and Pension Fund Custodians to N20 billion and N25 billion, respectively.

The new threshold must be met by 31 December 2026.

The announcement comes in a recent circular from the regulator, which has introduced several key guidelines over the past week under its Pension Revolution 2.0 initiative.

Previously, the minimum capital requirement for PFAs was last reviewed in April 2021, when it was increased from N1 billion to N5 billion.

The new directive divides PFAs into three categories:

Category A: PFAs managing N500 billion or more in assets must maintain a minimum capital of N20 billion plus 1% of their AUM above N500 billion.

Category B: PFAs with assets below N500 billion are required to hold at least N20 billion in capital.

Category C: Special-purpose PFAs, including NPF Pensions Limited, must maintain N30 billion, while the Nigerian University Pension Management Company Limited is required to have N20 billion.

PenCom also stated that the minimum capital requirement for a new PFA licence is now N20 billion, effective immediately.

For Pension Fund Custodians (PFCs), the minimum capital requirement had remained at N2 billion since 2004. The regulator has revised this for existing PFCs, setting it based on Shareholders’ Fund, unimpaired by losses, at N25 billion plus 0.1% of Assets Under Custody.

The minimum capital requirement for a new PFC licence is also set at N25 billion, effective immediately.

Explaining the rationale for the increase, the Director of PenCom’s Surveillance Department and signatory of the circular, A.M. Saleem, said, “The review is to enhance the financial stability and operational resilience and improve service delivery and long-term viability of the PFAs and PFCs. The capital requirement was reviewed in line with global best practice, which ensures that capital is proportionate to the risk exposure of the Pension Fund Operator. The new model aligned the capital requirement with the Pension Asset Under Management and Assets Under Custody of the PFAs and PFCs, respectively.

“Since the last review of the minimum capital requirement for PFA business in April 2021, the pension industry has witnessed significant changes in terms of the geometric growth of the AUM and the complex operating environment, with macroeconomic pressures requiring the deployment of adequate capital. PFAs are therefore required to maintain adequate capital to sustain the achievements of the Contributory Pension Scheme after 21 years of existence, support ongoing pension reform initiatives aimed at positioning the Nigerian pension industry to respond to macroeconomic pressures, and deploy adequate resources to effectively fund operations, improve service delivery and ensure long-term sustainability.”

The regulator further stated that the revised capital requirements will be reviewed every two years using the audited financial statements of each Pension Fund Operator, with any shortfall to be remedied within 90 days.

This week, PenCom also unveiled its Pension Revolution 2.0 initiative, under which it plans to introduce a minimum pension guarantee to protect retirees’ dignity and ensure a decent standard of living.