PCC as a Pre-Condition for Business
Under the new mandate, LPFOs are now required to demand a valid Pension Clearance Certificate (PCC) from all vendors and service providers. This PCC will be a mandatory condition for entering into or renewing any service-level or technical agreements. This directive is a direct response to persistent non-compliance with Section 2 of the Pension Reform Act (PRA) 2014, which stipulates that all public and private sector employers must participate in the CPS and remit employee contributions within seven working days of salary payment.
Despite continuous engagement and various enforcement efforts, PenCom has noted that a significant number of employers remain in violation of their statutory pension obligations. To combat this widespread non-compliance, the Commission has intensified its regulatory measures, including the appointment of Recovery Agents (RAs) whose mandate is to audit defaulting employers, recover outstanding contributions, and rigorously enforce applicable penalties.
Expanded Compliance Requirements Across the Value Chain
The new directive extends its reach beyond direct LPFO-vendor relationships. It now mandates that all counterparties interacting with LPFOs must sign a "Compliance Attestation." This attestation serves as a formal confirmation that they, in turn, enforce the PCC requirement across their entire network of vendors. This attestation must be updated annually and appended to all LPFO investment documentation, ensuring a consistent commitment to pension compliance throughout the investment ecosystem.
Furthermore, these counterparties are now obligated to submit valid PCCs from their own vendors before participating in any investment transactions with LPFOs. This includes a broad spectrum of financial instruments such as commercial papers, bond issuances, and bank placements, effectively widening the net of pension compliance enforcement.
Internal Policy Adjustments and Transition Period
In light of these comprehensive changes, LPFOs have been explicitly instructed to integrate these new requirements into their existing internal policies, due diligence processes, governance frameworks, and risk assessment procedures. The directive also casts a wider net on corporate structures: parent companies, subsidiaries, holding companies, and institutional shareholders of LPFOs are now also required to possess valid PCCs and ensure that all their own vendors are compliant before engaging in any agreements.
Recognizing the scope of these new regulations, PenCom has provided a six-month transition period for the full implementation of these directives. This grace period is intended to allow all affected parties to adjust their operations, comply with the new requirements, and obtain the necessary documentation. This strategic move by PenCom signifies a robust step towards strengthening the integrity and effectiveness of Nigeria's Contributory Pension Scheme, aiming to safeguard employees' pension savings more effectively.