PenCom Bars Non-Compliant Vendors, Enforces Mandatory Pension Clearance

The National Pension Commission (PenCom) has issued a sweeping directive to all Licensed Pension Fund Operators (LPFOs) in a renewed push to enforce compliance with the Pension Reform Act (PRA) 2014 and expand the coverage of Nigeria’s Contributory Pension Scheme (CPS).

In a circular sent to Pension Fund Administrators (PFAs) and Pension Fund Custodians (PFCs), PenCom warned that LPFOs must henceforth disengage from any business relationship with service providers and vendors that fail to remit pension contributions for their employees. Only firms with a valid Pension Clearance Certificate (PCC) issued by the Commission will be eligible to enter into or renew service or technical agreements.

Citing Section 2 of the PRA 2014, PenCom reiterated that all employers—whether in the public or private sector—are legally required to contribute to their employees’ pensions no later than seven working days after salary payments. Despite sustained awareness campaigns and enforcement measures, a large number of employers remain in breach of this provision.

As part of its intensified enforcement strategy, PenCom has engaged Recovery Agents to audit non-compliant organizations, recover outstanding contributions, and impose applicable penalties.

The latest directive introduces new layers of compliance obligations for LPFOs and their associates, including:

• Mandatory PCCs for Vendors: LPFOs must only transact with vendors and service providers who present valid PCCs.
• Investment Restrictions: LPFOs must ensure that investments are made only with counterparties that demand PCCs from their own vendors and service providers.
• Annual Compliance Attestation: Investment counterparties are required to sign and update annually a Compliance Attestation confirming that they enforce the PCC requirement across their vendor networks.
• Pre-Transaction Verification: Before engaging in transactions involving commercial papers, bonds, or bank placements, counterparties must submit valid PCCs from their vendors.
• Internal Policy Integration: LPFOs are expected to embed these requirements into their internal governance frameworks, including vendor selection, due diligence, and investment risk assessments.
• Group-Wide Compliance: Parent companies, subsidiaries, holding companies, and institutional shareholders of LPFOs must also obtain PCCs and ensure their vendors meet the same criteria. The Compliance Attestation applies to them as well.

To ease the transition, PenCom has granted a six-month implementation window from the date of issuance, after which full compliance will be enforced.

This bold policy move underscores PenCom’s commitment to closing compliance gaps and strengthening Nigeria’s pension system. By making pension compliance a non-negotiable requirement for doing business with licensed operators, the Commission aims to ensure that workers’ retirement benefits are protected and employers are held accountable.

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