The National Pension Commission (PenCom) has issued a directive to standardize the calculation and reporting of investment performance across pension portfolios, in a move aimed at improving transparency and promoting long-term investment strategies.
The circular, signed by A.M. Saleem, Head of PenCom’s Surveillance Department, applies to all Licensed Pension Fund Operators (PFOs) and took effect from July 1, 2025. It provides a comprehensive framework designed to reduce short-term decision-making by Pension Fund Administrators (PFAs) and enhance consistency across the industry.
Under the new rules, PFAs must calculate the rate of return over a 36-month period and convert it into an equivalent annual rate, expressed to four decimal places. Unitized funds will use the nth root method, while non-unitized funds—including Approved Existing Schemes (AES), Closed Pension Fund Administrators (CPFAs), and Additional Benefit Schemes (ABS)—will adopt the Time-Weighted Return (TWR) approach. Calculations must be performed monthly using a rolling 36-month interval, with opening values corresponding to audited periods approved by PenCom.
Additionally, PFAs are now required to report the Sharpe Ratio for each fund, using the three-year average yield of the 10-year FGN bond as the risk-free benchmark, alongside the fund’s standard deviation. Monthly performance reports must be published on each PFO’s website no later than the 10th day of every month.
The circular supersedes Sections 6.0 to 6.4 of the existing Regulation on Valuation of Pension Fund Assets. According to PenCom, the directive is intended to “ensure transparency and encourage sustainable, long-term investment strategies by minimizing short-term decision-making.”
In related news, the CEO of the Pension Fund Operators Association of Nigeria (PenOp), Oguche Agudah, recently disclosed that PenCom recovered N4.57 billion from defaulting employers between Q1 2024 and Q1 2025. This amount includes N2.12 billion in outstanding pension contributions and N2.45 billion in penalties imposed on 138 employers who failed to remit funds as required by law.
