Yemisi Izuora
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), in an ongoing efforts to expand coverage of the Contributory Pension Scheme (CPS)
The directive prohibits transacting with service providers and vendors that do not remit pensions for their employees as evidenced by a Pension Clearance Certificate issued by PenCom.
Section 2 of the PRA 2014 mandates all employers in the public and private sectors—including Federal, State, and Local Governments—to participate in the Contributory Pension Scheme (CPS) and remit pension contributions no later than seven (7) working days after salary payments.
PenCom, observed that despite continuous engagement and enforcement measures, a significant number of employers remain non-compliant with this legal obligation. PenCom intensified its regulatory actions by appointing Recovery Agents (RAs) to audit defaulters, recover outstanding contributions, and enforce sanctions.
To further strengthen enforcement, improve compliance, and broaden pension coverage, the Commission directs that all LPFOs shall ensure that any vendor or service provider they engage presents a valid Pension Clearance Certificate (PCC) issued by the Commission as a condition for entering into or renewing Service Level or Technical Agreements and LPFOs must also ensure that investments are made only with companies and financial institutions that require PCCs from their own vendors and service providers.
It said going forward, Every Counterparty must execute a Compliance Attestation, confirming that it enforces the PCC requirement across its vendor network. This attestation must be updated annually and included in 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.
The Commission also directed LPFOs to integrate these requirements into their internal policies, vendor selection processes, due diligence procedures, governance, and investment risk assessment frameworks.
The Parent Companies, Subsidiaries, Holding Companies and Institutional Shareholders of LPFOs shall possess valid Pension Clearance Certificate (PCC) and ensure that every vendor and service provider engaged by them complies with the requirement of the PCC as a precondition for entering into any Service Level or Technical Agreement. The requirement for compliance attestation is also applicable to the categories.
Accordingly, a six (6) month transition window from the date of issuing the above directives to LPFOs has been granted to allow full implementation.