The National Pension Commission (PenCom), through its circular dated 26th September 2025, introduced revised minimum capital requirements for Pension Fund Administrators (PFAs) in Nigeria as part of efforts to enhance the sector’s resilience amid consistent growth in Assets Under Management (AUM) and macroeconomic challenges.
The Shareholders’ Fund refers to the minimum unimpaired capital base that PFAs must maintain, now set at a minimum of N20 billion for most operators, with additional surcharges for larger AUMs.
For existing PFAs:
Category A (AUM above ₦500 billion): ₦20 billion + 1% of AUM exceeding ₦500 billion.
Category B (AUM below ₦500 billion): ₦20 billion minimum.
Special-purpose PFAs (e.g., NPF Pensions Limited): ₦30 billion; others like Nigerian University Pension Management Company (NUPEMCO): ₦20 billion.
For new PFA licences: ₦20 billion, effective immediately. Existing PFAs have until December 31, 2026, to meet the requirements, with shortfalls to be remedied within 90 days of identification.
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The requirements will be reviewed every two years based on audited financials.
This recapitalisation raises the previous ₦5 billion threshold significantly and applies similarly to Pension Fund Custodians (PFCs), which face a ₦25 billion base + 0.1% of AUM above ₦2.5 trillion.
The policy aims to strengthen the pension industry’s stability and efficiency. Key benefits include enhanced financial resilience. Higher capital buffers protect against shocks, ensuring PFAs can sustain operations during economic volatility and support the Contributory Pension Scheme’s (CPS) long-term viability.
Adequate capitalisation enables better resource allocation for technology & innovation, customer service, and pension reform initiatives, potentially leading to higher contributor confidence and broader coverage of the CPS.
By addressing the geometric growth of AUM (now over ₦25.90 trillion as of August 2025), it promotes a more robust framework aligned with global standards, reducing insolvency risks and fostering investor trust and assurance.
Investor appeal: Builds long-term confidence via stability.
Potential negative effects and challenges
While designed to strengthen the sector, the requirements have drawn criticism for their rigidity and potential to hinder growth, with notable impacts which include: disincentivising expansion: The 1% surcharge on AUM above ₦500 billion penalises scale, making it costlier for PFAs to grow beyond this threshold. This could slow AUM accumulation and limit reinvestment in business development.
The immediate ₦20 billion entry barrier for new PFAs discourages startups, favouring incumbents and increasing market concentration, which could heighten systemic risks if a few large players dominate.
Firms may need to retain earnings to meet thresholds, curbing dividend payouts and making the sector less appealing to shareholders and new investors. This risks capital flight or reluctance from new investors, potentially stalling industry innovation. Critics argue it could reduce overall sector dynamism, with PFAs facing challenges in a high-interest-rate environment to source funds without diluting ownership or compromising returns.
The 90-day shortfall remedy window is seen as aggressive, possibly forcing rushed equity raises, asset sales at a loss, or even market exits. Without risk-based adjustments (e.g., tying capital to asset volatility rather than total AUM), it imposes a “one-size-fits-all” burden that overlooks efficient, low-risk operators.
The fate of staff hangs in the balance as a potential merger and/or acquisition is imminent, which may lead to potential job losses with attendant effects.
Overall, while the recapitalisation addresses critical vulnerabilities in Nigeria’s pension ecosystem, its effects could be mitigated through phased implementation, risk-based calibration, and extended grace periods to balance protection with growth.
Article written by Muritala Tijani, Benefits Department, Trustfund Pensions Limited
