PENCOM Nigeria Issues Revised RLA Custodial Fees Circular

• PENCOM has issued a circular outlining revised custodial fees structure and processes for RSAs.
• PFAs are required to pay a minimum of N1.50 per unit in fixed income securities and N2.00 per unit in equities.
• The circular aims to standardize fees and promote transparency and fairness in the pension industry.
• Compliance officers and lawyers should advise clients on the implications of these changes.

PFAs are required to pay a minimum of N1.50 per unit in fixed income securities and N2.00 per unit in equities.

The National Pension Commission (PENCOM) has issued a circular to all pension fund administrators (PFAs) in Nigeria, outlining the revised custodial fees structure and processes for Retirement Savings Accounts (RSAs). The circular, which was released on February 10, 2023, aims to standardize the fees charged by custodians for managing pension assets. According to the circular, PFAs are required to pay a minimum of N1.50 per unit of RSA investment in fixed income securities and N2.00 per unit in equities. This is a significant increase from the previous rates of N0.75 and N1.25 respectively.

The circular is based on Section 84 of the Pension Reform Act (PRA) 2014, which empowers PENCOM to regulate the pension industry in Nigeria. The PRA also requires PFAs to ensure that their custodial fees are reasonable and do not compromise the interests of RSA holders. In recent years, there have been concerns about the high custodial fees charged by some PFAs, leading to calls for regulatory intervention. The circular is a response to these concerns and aims to promote transparency and fairness in the pension industry.

The revised custodial fees structure and processes outlined in the circular have significant implications for RSA holders and PFAs alike. For RSA holders, the increased fees may result in lower returns on their investments, while for PFAs, the new rates may require them to review their business models and fee structures. Compliance officers and lawyers should be aware of these changes and advise their clients accordingly. The circular also highlights the need for ongoing regulatory oversight and monitoring to ensure that the pension industry remains stable and secure.

Lawyers and compliance officers should watch for the implications of this circular on their clients' pension fund management, particularly in terms of fee structures and processes.

Source: Original reporting via National Pension Commission