The Nationwide Pension Fee (PenCom) has launched a brand new directive aimed toward standardizing the methodology for calculating and reporting funding efficiency throughout pension portfolios.
The round, signed by A.M. Saleem, Head of the Surveillance Division, was addressed to all Licensed Pension Fund Operators (PFOs) and took impact from July 1, 2025.
The round outlines a complete framework designed to reinforce transparency, promote long-term funding methods, and scale back short-term decision-making amongst Pension Fund Directors (PFAs).
Standardized Fee of Return Methodology
Underneath the brand new tips, PFAs are required to calculate the speed of return over a 36-month interval and convert it into an equal annual charge, expressed as a proportion as much as 4 decimal locations.
For unitised funds, this includes computing the nth root of the ratio between the accounting unit’s finish worth and its starting worth, subtracting one, and expressing the end result as a proportion.
Non-unitised funds, together with Accepted Present Schemes (AES), Closed Pension Fund Directors (CPFAs), and Further Profit Schemes (ABS), should undertake the Time-Weighted Return (TWR) methodology. This strategy ensures consistency throughout various fund constructions.
In accordance with PenCom, the computation have to be carried out month-to-month utilizing a rolling 36-month interval. As an example, to find out the annualized return as of November 30, 2024, PFAs will use the accounting unit worth from October 31, 2021, as the start line.
Importantly, the opening values utilized in these calculations should correspond to intervals which were audited and authorized by PenCom.
Sharpe Ratio and Benchmarking
Along with efficiency metrics, PFAs at the moment are mandated to report the Sharpe Ratio for every fund.
This ratio can be calculated utilizing the three-year common yield of the 10-year Federal Authorities of Nigeria (FGN) bond because the risk-free benchmark, alongside the fund’s normal deviation.
Month-to-month efficiency reviews have to be printed on every PFO’s web site no later than the tenth day of each month.
Regulatory Replace
The round supersedes Sections 6.0 to six.4 of the prevailing Regulation on Valuation of Pension Fund Property. All inquiries relating to the directive ought to be directed to the Head of the Funding Supervision Division.
“This round is meant to make sure transparency and encourage sustainable, long-term funding methods by minimizing short-term decision-making,” the Fee acknowledged.
What You Ought to Know
- Final week, CEO of Pension Fund Operators Affiliation of Nigeria (PenOp), Oguche Agudah, disclosed that PenCom has recovered a complete of N4.57 billion from defaulting employers between the primary quarter of 2024 and the primary quarter of 2025.
- Agudah defined that the recovered sum consists of N2.12 billion in excellent pension contributions and N2.45 billion in penalties imposed on 138 employers who did not remit pension funds as required by regulation.
- Agudah additionally reminded employers of their authorized obligations, noting that any group with three or extra staff is required to remit pension contributions.
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