PenCom issues new directive to pension operators with 6 months transaction window
By Eberechi Obinagwam
The National Pension Commission (PenCom) has issued a new directive to all Licensed Pension Fund Operators (LPFOs), comprising Pension Fund Administrators (PFAs) and Pension Fund Custodians (PFCs), prohibiting transactions with service providers and vendors that do not remit pensions for their employees as evidence by a Pension Clearance Certificate issues by PenCom.
According to the commission, this move aims to expand coverage of the Contributory Pension Scheme (CPS).
As stated in the new directive, all LPFOs are required to ensure that any vendor or service provider they engage presents a valid Pension Clearance Certificate (PCC) issued by PenCom as a condition for entering into or renewing Service Level or Technical Agreements. For instance, one of the key requirements is that LPFOs must ensure investments are made only with companies and financial institutions that require PCCs from their own vendors and service providers.
According to the commission, section 2 of the Pension Reform Act (PRA) 2014 mandates all employers in the public and private sectors, including 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 enforcement measures, many employers remain non-compliant.
As a result, the commission intensified its regulatory actions by appointing Recovery Agents (RAs) to audit defaulters, recover outstanding contributions, and enforce sanctions.
PenCom’s new directives aim to strengthen enforcement, improve compliance, and broaden pension coverage. Other key requirements include:
- Counterparties executing a Compliance Attestation, confirming enforcement of the PCC requirement across their vendor network, to be updated annually and included in LPFO investment documentation.
- Counterparties submitting valid PCCs from their vendors/service providers before engaging in investment transactions with LPFOs, including those involving commercial papers, bond issuances, ans bank placements.
PenCom has granted a six-month transition window for LPFOs from the date of issuing the directives to allow full implementation.
