The National Pension Commission (PenCom) has reinforced its commitment to ensuring compliance with the Pension Reform Act 2014 (PRA 2014) by mandating all entities associated with licensed pension fund operators (PFOs) to obtain valid Pension Clearance Certificates (PCCs). This directive extends beyond the PFOs themselves to encompass their parent companies, subsidiaries, holding companies, institutional shareholders, and even their vendors and service providers. This comprehensive approach aims to create a robust ecosystem of compliance, ensuring that all participants within the pension industry uphold their obligations to employees’ retirement savings. The move underscores PenCom’s determination to broaden pension coverage and strengthen the integrity of the Nigerian pension system.
The PCC serves as verifiable proof that an organization is remitting mandatory pension contributions for its employees, as stipulated by the PRA 2014. This certificate is not merely a formality; it’s a critical requirement for companies seeking government contracts and, now, for engaging with PFOs. By extending the PCC requirement to the broader network of entities connected to PFOs, PenCom intends to close loopholes and ensure that all stakeholders within the pension industry contribute to a culture of compliance. This strengthened enforcement strategy aims to protect employees’ retirement funds and promote transparency and accountability across the pension landscape.
PenCom’s directive provides a six-month grace period for PFOs to ensure compliance within their networks. This timeframe allows organizations to audit their current practices, identify gaps in compliance, and implement necessary corrective actions. The Commission expects PFOs to take proactive measures to educate their affiliated entities about the importance of the PCC and the legal ramifications of non-compliance. This period of adjustment is crucial for facilitating a smooth transition and ensuring that all parties understand and fulfill their obligations under the new directive.
The rationale behind PenCom’s intensified enforcement stems from the persistent issue of non-compliance among numerous employers. Despite the PRA 2014 mandating participation in the Contributory Pension Scheme (CPS) for all employers across public and private sectors, a significant number remain delinquent in remitting pension contributions. This non-compliance not only jeopardizes employees’ retirement security but also undermines the financial stability of the pension system. To address this challenge, PenCom has implemented various strategies, including increased sensitization, the deployment of Recovery Agents to audit defaulters and recover outstanding contributions, and the imposition of sanctions.
PenCom’s new directive also introduces further measures to bolster compliance. PFOs are now required to obtain a compliance attestation from every counterparty, confirming their adherence to the PCC requirement across their own vendor network. This attestation must be renewed annually and incorporated into the PFO’s investment documentation. Additionally, counterparties must furnish valid PCCs from their vendors and service providers before engaging in any investment transactions with PFOs, regardless of the transaction type. These stringent measures aim to create a multi-layered system of accountability, ensuring that compliance permeates every level of the pension investment chain.
The Nigerian government has expressed strong support for leveraging the nation’s substantial pension assets, currently exceeding ₦23 trillion (approximately 8.6% of GDP), to stimulate national development. The government envisions the pension industry as a crucial engine for long-term economic growth and advocates for strategically deploying these assets to finance critical infrastructure projects, boost housing development, invest in the energy sector, and promote digital inclusion. The goal is to maximize the impact of these funds on national development while safeguarding the retirement savings of Nigerian workers. This alignment of pension investments with national priorities is expected to contribute significantly to the country’s overall economic progress and improve the well-being of its citizens.
