The National Pension Commission (PenCom) has issued a directive prohibiting Licensed Pension Fund Operators (LPFOs) from transacting with vendors and service providers that do not comply with the Pension Reform Act 2014. The move is part of PenCom’s broader effort to deepen compliance and expand the reach of the Contributory Pension Scheme (CPS).
Under the new regulation, LPFOs—which include Pension Fund Administrators (PFAs) and Pension Fund Custodians (PFCs)—must ensure that all vendors they engage present a valid Pension Clearance Certificate (PCC) issued by the Commission. This condition applies to both new engagements and renewals of service level or technical agreements.
The Pension Reform Act 2014, particularly Section 2, requires all employers in the public and private sectors—including federal, state, and local governments—to enroll in the CPS and remit pension contributions no later than seven working days after paying salaries. However, despite ongoing enforcement and public sensitization, a significant number of employers continue to default.
To address these lapses, PenCom has intensified its oversight by appointing Recovery Agents to audit non-compliant organizations, recover outstanding contributions, and enforce sanctions. The Commission has now strengthened enforcement measures by tying vendor and investment relationships to PCC compliance.
As part of the directive, LPFOs are required to invest only in companies and financial institutions that demand PCCs from their own vendors and service providers. Counterparties in investment transactions must also execute an annual Compliance Attestation confirming they enforce this requirement within their vendor networks. Furthermore, valid PCCs must be presented by vendors engaged in any transaction involving commercial papers, bond issuances, or bank placements.
The directive extends to the parent companies, subsidiaries, holding companies, and institutional shareholders of LPFOs. These entities are also required to obtain valid PCCs and ensure that every vendor or service provider they engage complies with the PCC requirement as a precondition for entering into any service-level or technical agreement. They are equally subject to the annual compliance attestation mandate.
To ensure smooth implementation of the directive, PenCom has granted a six-month transition window, during which LPFOs are expected to align their internal policies, vendor selection processes, due diligence procedures, governance structures, and investment risk assessment frameworks with the new requirements.
