PenCom  Prohibits PFAs, PFCs  from Transacting Business With Non-pension Contribution Remitting Firms

Ebere Nwoji 

The National Pension Commission (PenCom), has issued a directive to all Licensed Pension Fund Operators (LPFOs), comprising Pension Fund Administrators (PFAs) and Pension Fund Custodians (PFCs),  prohibiting them from transacting any business 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 not later than seven working days after salary payments.

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.

According to the commission, 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.

The commission said LPFOs must also ensure that investments were made only with companies and financial institutions that required PCCs from their own vendors and service providers.

It stated, “Every counterparties 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.”

Giving further directive, the commission said, “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 said the LPFOs have been directed to integrate these requirements into their internal policies, vendor selection processes, due diligence procedures, governance, and investment risk assessment frameworks, adding that the  Parent companies, subsidiaries, holding companies and institutional shareholders of LPFOs should 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 commission further said the  requirement for compliance attestation was also applicable to the categories adding that, “a six month transition window from the date of issuing the above directives to LPFOs has been granted to allow full implementation.”