The National Pension Commission has issued a directive introducing a standardized framework for calculating and reporting investment performance across pension portfolios.
The circular, signed by A.M. Saleem, Head of the Surveillance Department, and addressed to all Licensed Pension Fund Operators, came into effect on July 1, 2025.
It establishes a uniform methodology aimed at improving transparency, encouraging long-term investment strategies, and curbing short-term decision-making by Pension Fund Administrators.
Under the revised guidelines, PFAs must calculate investment returns over a 36-month period and convert the outcome into an annualized rate, expressed as a percentage to four decimal places.
For unitised funds, the calculation requires taking the nth root of the ratio between the accounting unit’s closing value and its opening value, then subtracting one and presenting the result as a percentage.
For non-unitised funds such as Approved Existing Schemes (AES), Closed Pension Fund Administrators (CPFAs), and Additional Benefit Schemes (ABS), the guidelines mandate the use of the Time-Weighted Return (TWR) method to ensure consistency across different fund structures.
PenCom specified that the computation must be carried out monthly on a rolling 36-month basis. For example, to determine the annualized return as of November 30, 2024, PFAs would reference the accounting unit value from October 31, 2021, as the starting point.
Additionally, all opening values used in these calculations must be drawn from periods that have been audited and approved by PenCom.
Beyond performance returns, PFAs are now required to disclose the Sharpe Ratio for each fund.
The ratio will be derived using the three-year average yield of the 10-year Federal Government of Nigeria (FGN) bond as the risk-free benchmark, combined with the fund’s standard deviation.
PenCom also directed that monthly performance reports be published on each PFO’s website no later than the 10th day of every month.
“This circular is intended to ensure transparency and encourage sustainable, long-term investment strategies by minimizing short-term decision-making,” the Commission stated.
Last week, the Chief Executive Officer of the Pension Fund Operators Association of Nigeria, Oguche Agudah, revealed that PenCom recovered N4.57 billion from defaulting employers between Q1 2024 and Q1 2025.
He noted that the amount comprised N2.12 billion in unremitted pension contributions and N2.45 billion in penalties imposed on 138 employers who failed to comply with pension remittance obligations.
