Assessing the Security of Pension Funds in Nigeria

One of the critical concerns for Nigerians enrolled in the Contributory Pension Scheme (CPS) is the security of their funds handled by pension managers and custodians.

A review indicates that a significant policy change initiated by the federal government in 2004 was the shift to the Contributory Pension Scheme, under President Olusegun Obasanjo’s administration.

This shift shifted responsibilities from the Defined Benefit Scheme (DBS) to the CPS, where employees contribute 8% of their salaries into their retirement savings accounts, while employers contribute 10%.

Prior to the CPS, the Nigerian pension sector faced numerous issues, including a lack of accountability, transparency, and weak administrative frameworks.

These lingering concerns have made many Nigerians skeptical, leading to a belief that the current pension scheme has not met its objectives, despite the government's repeated attempts to clarify its operations and advantages.

In this article, Weekend Trust examines the protective measures implemented to secure pension funds within the CPS, as well as the drawbacks associated with the scheme.

Separation of Pension Assets

According to findings from Weekend Trust, Pension Fund Administrators (PFA) oversee pension funds without direct access to them, as custody lies with a separate entity known as the Pension Fund Custodian (PFC).

Essentially, while PFAs are responsible for making daily investment decisions according to regulations from the National Pension Commission (PenCom), the PFC handles payments for these investments and receives dividends or profits on behalf of the PFA, with PenCom ensuring compliance by both entities with existing regulations.

The primary objective of this separation between custody and management is to improve accountability. This ring-fencing of pension assets, coupled with regulatory safeguards, has led to the consistent growth of a significant pool of pension assets.

Continuous Monitoring of Investment

PenCom mandates all PFAs to deliver daily investment valuation reports. These reports detail the value of investments made with pension funds at the close of each day, allowing PenCom to verify compliance with investment regulations and quickly identify violations for corrective measures. Therefore, the safety of pension funds is continuously overseen by PenCom.

Isolation of Pension Funds from Operators’ Assets

Further analysis by Weekend Trust reveals that a strict separation exists between pension funds and the assets of pension operators. This prevents operators from merging their own funds with pension funds, which are kept in exclusive accounts under secure custody by PFCs.

In practice, this means that an operator’s financial troubles will not adversely affect the pension funds. Consequently, if an operator faces capital shortfalls, pension funds can efficiently be reassigned to another solvent operator as instructed by PenCom. This strict segregation enhances the transparency of the CPS.

Tight Investment Regulations

Investments made by PFAs with pension funds are stringently regulated by PenCom's Investment Regulation, which outlines approved investment vehicles and stipulates limits on the percentage of funds that can be invested. This regulation helps in risk management, ensuring the safety of the funds. PFAs can only make investment decisions within the bounds of this regulation.

As a result, pension funds are safeguarded solely for the purpose of providing retirement and terminal benefits to the holders of Retirement Savings Accounts (RSA). The funds are prohibited from being utilized as loans or collateral, thus averting depletion through non-performing loans taken by RSA holders or by PFAs extending loans to third parties.

Identifying Shortcomings of CPS – An Expert's View

In a conversation with Weekend Trust, public affairs analyst Mark Jimoh pointed out that despite the notable advancements in asset growth and reforms within the scheme, it remains flawed and has certain deficiencies that require rectification.

He highlighted issues such as the delayed remittance of contributions by both employees and employers which leads to pension benefit delays. Jimoh recalled instances where some employers intentionally failed to remit deducted pension contributions, which amounted to millions. This situation needs a vigorous resolution.

Furthermore, he noted that many pensioners encounter hurdles while accessing their pensions, calling for focused action from the authorities. There is also a pressing need for increased public education surrounding the workings and benefits of the CPS to address the widespread lack of awareness.

Another pointed out shortfall is the low penetration of the scheme across various states. Timely payment of benefits and improvements remains crucial for the scheme's success, according to him.

Pension Fund Assets Reach N27 Trillion as of December 31

Additionally, Weekend Trust reports that Nigeria’s pension fund assets closed at N27.45 trillion as of December 31, 2025, according to the dashboard of the unaudited pension funds industry portfolio.

The National Pension Commission’s figures indicated that this year-end figure signifies a net increase of N399.27 billion since November 2025 when total pension assets were N27.05 trillion. Yearly, total pension assets ascended by N4.94 trillion from N22.51 trillion in December 2024, reflecting an annual growth rate of approximately 21.9%.

The majority of this annual growth stemmed from the Retirement Savings Account Funds, particularly Fund II and Fund III. The figures for RSA Fund II shot up from N9.24 trillion in December 2024 to N11.52 trillion in December 2025, an upsurge of nearly N2.28 trillion. Similarly, RSA Fund III grew from N5.92 trillion to N7.02 trillion, contributing about N1.10 trillion year-on-year, while RSA Fund IV rose from N1.62 trillion to N2.25 trillion, indicating a lift of around N630 billion in the same period.

Assets in Existing Schemes also saw a notable uplift from N2.79 trillion in December 2024 to N3.28 trillion in the following year, with Corporate Pension Fund Administrators (CPFAs) creeping up mildly from N2.60 trillion to N2.69 trillion.

During this review period, there was a considerable increase in the holdings of federal government securities, which surged from N14.11 trillion in December 2024 to N16.33 trillion by December 2025. Investment in treasury bills also saw a rise year-on-year, reinforcing the industry’s conservative risk approach. Moreover, investments in domestic ordinary shares escalated from N2.24 trillion in December 2024 to N3.96 trillion in December 2025, a year-on-year increment of approximately N1.71 trillion, supported by enhanced equity market valuations and greater participation within Fund II and Fund III portfolios.

RSA membership climbed from 10.58 million contributors in December 2024 to 11.04 million by the end of 2025, with over 450,000 new contributors added over the year, highlighting a steady inflow of contributions into the system.

On a month-to-month basis, the December growth was primarily fueled by valuation gains and new contributions into Retirement Savings Account Funds, particularly Fund II, Fund III, and Fund IV, which collectively dominate the industry assets.

As of December 31, 2025, the total number of Retirement Savings Accounts (RSA) reached 11,040, an increase from 11,009,000 as of November 30, marking a steady rise in pension enrollment.

Overview of Pension Funds and Custodians

Weekend Trust's investigations reveal that approximately 20 Pension Fund Administrators and three Pension Fund Custodians (PFCs) operate as listed on the National Pension Commission’s website.

The list includes Access ARM Pensions Ltd, Cardinal Stone Pensions Ltd, Citizens Pensions Ltd, Crusader Sterling Pensions Ltd, FCMB Pensions Ltd, Fidelity Pension Managers Ltd, and Guaranty Trust Pension Managers Ltd.

Others in the list are Leadway Pensure PFA Ltd, Nigerian University Pension Management Company (NUPEMCO), NLPC Pension Fund Administrators, Norremberger Pensions Ltd, NPF Pensions Ltd, OAK Pensions Ltd, and Parthian Pensions Ltd.

Additionally, Pensions Alliance Ltd, Premium Pension Ltd, Stanbic IBTC Pension Managers Ltd, Tangerine APT Pensions Ltd, Trustfund Pensions Ltd, and Veritas Glanvills Pensions Ltd are also included.

Correspondingly, the approved Pension Fund Custodians by the regulator include First Pension Custodian Nigeria Ltd, UBA Pension Custodian Ltd, and Zenith Pensions Custodian Ltd.