The difference Between a Pension Fund Administrator (PFA) and a Pension Fund Custodian (PFC) in Nigeria cannot be overemphasized with the current happens in the national employment terrain.
The Nigerian pension industry plays a vital role in ensuring financial security for employees after retirement. Over the years, various reforms have strengthened the system, creating a more transparent and sustainable structure where pension contributions are properly managed, invested, and safeguarded.
The Pension Reform Act (PRA) 2014 provides the regulatory framework that ensures contributors’ funds are not only well-invested but are also protected against mismanagement and fraud.
At the center of this structure are two key institutions: Pension Fund Administrators (PFAs) and Pension Fund Custodians (PFCs). Although they function together under PenCom’s strict supervision, their responsibilities are distinct. PFAs manage and invest pension funds, while PFCs hold the pension assets in safe custody.
Understanding the difference between PFAs and PFCs is essential for employers, employees, and the general public. This article explains their roles, legal framework, examples of licensed PFAs, and common questions about how the pension system operates in practice.
The Role of Pension Fund Administrators (PFAs)
Pension Fund Administrators are private companies licensed by PenCom to manage and invest pension contributions under the Contributory Pension Scheme (CPS). Their core functions include managing Retirement Savings Accounts (RSAs), investing pension assets, and ensuring the proper payment of retirement benefits.
Key functions of PFAs:
- 1. Opening and Managing RSAs
- 2. Investment of Pension Assets
- 3. Payment of Retirement Benefits
- 4. Transparency and Accountability
To be licenced as a PFA, a company must:
- Be a limited liability company whose sole business is pension fund administration.
- Demonstrate professional capacity and expertise in pension fund management.
- Meet the requirements set out in Section 60 of the PRA 2014.
Examples of PFAs in Nigeria include:
- Stanbic IBTC Pension Managers
- CrusaderSterling Pensions
- Trustfund Pensions Limited
- AccessARM Pensions
- Norrenberger Pensions
- Leadway Pensure PFA
- Citizen Pension Limited
- Premium Pension Limited
- Oak Pensions Limited
The Role of Pension Fund Custodians (PFCs)
While PFAs manage the administration and investment of pension funds, Pension Fund Custodians are responsible for the safekeeping and custody of pension assets.
PFCs are licensed institutions, usually subsidiaries of strong financial institutions, that hold pension contributions in trust for contributors. They receive contributions, settle transactions, and perform activities relating to the administration of pension investments on behalf of PFAs.
Key functions of PFCs:
- 1. Custody of Pension Assets
- 2. Settlement of Transactions
- 3. Contribution Receipt Notifications
- 4. Guarantee of Safety
To be licenced as a PFC, an institution must:
- Be wholly owned by a licenced financial institution (such as a commercial bank).
- Possess the required minimum net worth as specified by PenCom.
- Comply with Section 62 of the PRA 2014.
Key Differences Between PFAs and PFCs
| Feature | PFA | PFC |
|---|---|---|
| Primary Role | Manages RSAs and invests pension funds | Safeguards pension assets |
| Legal Basis | Licensed under Section 60 PRA 2014 | Licensed under Section 62 PRA 2014 |
| Corporate Structure | Limited liability company solely for pension administration | Wholly owned by licensed financial institutions |
| Major Functions | Opens RSAs, manages accounts, invests funds, pays benefits | Receives contributions, notifies PFAs, settles investment transactions |
| Guarantee Requirement | Must demonstrate professional fund management capacity | Parent institution must guarantee full value of assets held |
Frequently Asked Questions (FAQs)
A PFA manages and invests pension contributions, while a PFC holds pension assets in trust and ensures their safekeeping.
No. The PRA 2014 separates their roles to eliminate conflicts of interest and ensure transparency.
Both are regulated by the National Pension Commission (PenCom).
Consider their track record, customer service, ease of access to information (such as mobile apps and other online platforms), and investment performance.
The PFC’s parent financial institution is required to guarantee the full value of the pension assets, ensuring contributors’ funds remain protected.
Yes. Under PenCom’s Transfer Window, contributors can switch PFAs once a year.
Conclusion
Nigeria’s pension framework is designed to protect contributors and promote long-term sustainability. PFAs manage and invest pension funds, while PFCs safeguard the assets, creating a system built on accountability, transparency, and efficiency.
With reputable PFAs such as Stanbic IBTC Pension, Trustfund Pensions, Access Pensions, and CrusaderSterling Pensions, contributors have reliable institutions to choose from.
Understanding the distinction between PFAs and PFCs helps contributors and employers make informed decisions that support long-term financial security.
Do you need an expert in remitting your employees pension or processing your pension certificate?
Both pension remittance and processing a PenCom certificate require expert guidance. With our years of experience in business formation and regulatory compliance, TCorporate makes the process seamless so you can focus on managing your business.
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Disclaimer: This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice.
For specific legal advice, contact us.
WRITTEN BY
Anulika Esther Ezigbo
Legal Associate
TCorporate Legal Advisory
