PenCom Mandates Pension Compliance for All Pension Fund Operators’ Partners
By Patience Ikpeme
The National Pension Commission (PenCom) has issued a new directive requiring all Licensed Pension Fund Operators (LPFOs), which include Pension Fund Administrators (PFAs) and Pension Fund Custodians (PFCs), to exclusively engage with service providers and vendors that are compliant with pension remittances for their employees. Proof of compliance will be a valid Pension Clearance Certificate (PCC) issued by PenCom.
This directive is part of PenCom’s ongoing efforts to expand the coverage of the Contributory Pension Scheme (CPS) and enhance overall compliance with pension regulations across the country.
Section 2 of the Pension Reform Act (PRA) 2014 mandates all employers in both the public and private sectors—encompassing Federal, State, and Local Governments—to participate in the CPS and remit pension contributions no later than seven working days after salary payments.
Despite continuous engagement and various enforcement measures, a significant number of employers remain non-compliant with this legal obligation. PenCom has previously intensified its regulatory actions by appointing Recovery Agents (RAs) to audit defaulters, recover outstanding contributions, and apply appropriate sanctions.
To further strengthen enforcement, improve compliance rates, and broaden pension coverage, the Commission has issued the following specific directives: all LPFOs must ensure that any vendor or service provider they engage presents a valid Pension Clearance Certificate (PCC) issued by PenCom. This will be a mandatory condition for entering into or renewing Service Level or Technical Agreements.
In addition, LPFOs are also required to ensure that investments are made only with companies and financial institutions that themselves demand PCCs from their own vendors and service providers.
Every Counterparty involved must execute a Compliance Attestation, confirming that it enforces the PCC requirement across its entire vendor network. This attestation needs to be updated annually and included in all LPFO investment documentation.
Counterparties must also submit valid PCCs from their own vendors/service providers before engaging in any investment transaction with LPFOs, including those involving commercial papers, bond issuances, and bank placements.
PenCom has directed LPFOs to integrate these new requirements into their internal policies, vendor selection processes, due diligence procedures, governance frameworks, and investment risk assessment frameworks.
Furthermore, the Parent Companies, Subsidiaries, Holding Companies, and Institutional Shareholders of LPFOs are now also required to possess valid Pension Clearance Certificates (PCCs). They must ensure that every vendor and service provider engaged by them adheres to the PCC requirement as a precondition for entering into any Service Level or Technical Agreement. The requirement for a compliance attestation is similarly applicable to these categories.
To facilitate a smooth transition and full implementation, a six-month window has been granted to LPFOs from the date of issuance of these directives.
