New PenCom Rule Blocks Dual Shareholding in Pension Sector

The National Pension Commission has issued new guidelines banning significant cross-shareholding in more than one licensed Pension Fund Operator (LPFO). Effective immediately, the directive aims to enhance transparency, strengthen governance, and safeguard pension assets.

PenCom defines significant cross-shareholding as a situation where a major shareholder in one LPFO acquires or becomes entitled to a substantial stake—five percent or more—in another LPFO. This can occur through direct investment, mergers, acquisitions, conversion of debt to equity, or legal transmission such as inheritance.

The Commission emphasized that such arrangements are now prohibited, regardless of how the stake is acquired. It clarified that shareholdings of related persons—including affiliates, subsidiaries, directors, employees, and family members—will be aggregated to determine compliance.

For existing cases of cross-shareholding, PenCom has granted a six-month window for divestment. Any shares held in violation of the new rules will be rendered void, with no voting rights, dividends, or governance privileges. LPFOs are also barred from recognizing such shares in their records.

In addition to the shareholding restrictions, PenCom released a circular on Centralised or Shared Services Arrangements (CSSAs). LPFOs may now engage their parent or related companies for services such as HR, ICT, legal advisory, marketing, and facilities management—provided these arrangements are conducted at arm’s length and do not compromise operational independence or fiduciary duties.

To further drive reform, PenCom inaugurated the Pension Industry Leadership Council in Abuja. The council is expected to provide strategic coordination across the sector, similar to the Bankers’ Committee in the financial industry.

Meanwhile, the Commission confirmed that the N758 billion pension bond approved earlier in the year is progressing swiftly. The bond is intended to clear outstanding pension liabilities, including salary shortfalls for university professors and unfunded commitments to the Pension Protection Fund. Payments are expected to begin by the end of September or early October.