PenCom Prohibits Transactions With Service Providers, Vendors In Default Of Remitting Employees’ Pensions

…Makes PCC compulsory proof of compliance

The National Pension Commission (PenCom) has prohibited transactions with service providers and vendors in default of remitting pensions for their employees as evidenced by a Pension Clearance Certificate (PCC) issued by PenCom.

This forms the kernel of new directive issued to all Licensed Pension Fund Operators (LPFOs), comprising Pension Fund Administrators PFAs) and Pension Fund Custodians (PFCs), in efforts towards expanding coverage of the Contributory Pension Scheme (CPS).

In a statement, PenCom cited Section 2 of the PRA 2014 which mandates all employers in the public and private sectors—including Federal, State, and Local Governments—to participate in the Contributory Pension Scheme (CPS) and remit pension contributions no later than seven (7) working days after salary payments.

It regretted that despite continuous engagement and enforcement measures, a significant number of employers remain non-compliant with this legal obligation.

Among the measures already taken by PenCom to boost compliance include intensification of its regulatory actions by appointing Recovery Agents (RAs) to audit defaulters, recover outstanding contributions, and enforce sanctions.

To further strengthen enforcement, improve compliance, and broaden pension coverage, the Commission issued the following directives and six months transition window for full implementation.

According to the directive, “All LPFOs shall ensure that any vendor or service provider they engage presents a valid Pension Clearance Certificate (PCC) issued by the Commission as a condition for entering into or renewing Service Level or Technical Agreements.

“LPFOs must also ensure that investments are made only with companies and financial institutions that require PCCs from their own vendors and service providers.

“Every Counterparty must execute a Compliance Attestation, confirming that it enforces the PCC requirement across its vendor network. This attestation must be updated annually and included in LPFO investment documentation.

“Counterparties must also submit valid PCCs from their own vendors/service providers before engaging in any investment transaction with LPFOs, including those involving commercial papers, bond issuances, and bank placements.

“LPFOs have been directed to integrate these requirements into their internal policies, vendor selection processes, due diligence procedures, governance, and investment risk assessment frameworks.

“The Parent Companies, Subsidiaries, Holding Companies and Institutional Shareholders of LPFOs shall possess valid Pension Clearance Certificate (PCC) and ensure that every vendor and service provider engaged by them complies with the requirement of the PCC as a precondition for entering into any Service Level or Technical Agreement. The requirement for compliance attestation is also applicable to the categories.”

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