The National Pension Commission (PenCom) has warned Pension Fund Administrators (PFAs) against investing pension fund assets in the Additional Tier-1 (AT1) Capital of Deposit Money Banks.
In a circular signed by the Director of Surveillance Department, A.M. Saleem, and addressed to all licensed Pension Fund Operators, the Commission clarified that AT1 does not qualify as an eligible asset under its investment guidelines.
PenCom noted that it had recently received several requests from PFAs seeking approval to channel pension funds into AT1 instruments issued by banks. However, the Commission stressed that AT1, as defined by Central Bank of Nigeria (CBN) regulations, is perpetual in nature, carries no maturity date, and has no incentives for redemption.
“This provision is contrary to Section 2.4 of the Regulations on Investment of Pension Fund Assets,” the circular stated. The section specifically bars PFAs from investing in instruments subject to prohibitions or limitations on sale or purchase, except in the case of certain regulated funds.
“Arising from the foregoing, PFAs cannot invest pension fund assets in Additional Tier-1 Capital instruments issued by Deposit Money Banks,” the Commission ruled.
The directive is expected to provide clarity and safeguard pension fund contributors from undue exposure to risky and illiquid financial instruments.
