How safe are pension funds?

One of the many questions on the minds of Nigerians who are enrolled under the Contributory Pension Scheme (CPS) is how safe their funds are in the hands of the managers and custodians of pension funds and assets.

Checks show that one of the major policy shifts by the federal government in 2004 was the transition to the Contributory Pension Scheme during the administration of former President Olusegun Obasanjo.

The transition departed from the Defined Benefit Scheme (DBS) to the Contributory Pension Scheme (CPS), an arrangement where an employee contributes 8 per cent of their salary into his/her retirement savings account while the employer contributes 10 per cent.

Before the introduction of the Contributory Pension Scheme, Nigeria’s pension sector was riddled with numerous challenges. These challenges, ranging from lack of accountability and transparency to weak administrative structures, plagued the system.

To date, these doubts remain in the minds of many Nigerians who believe that the current pension scheme has not served its purpose despite constant efforts by the government to explain how the scheme works and why it is efficient.

Weekend Trust analyses some of the measures put in place to safeguard pension funds under the Contributory Pension Scheme, as well as some of the shortfalls of the scheme.

Ring-fencing of pension assets

Checks by Weekend Trust show that Pension Fund Administrators (PFA) manage the pension funds without having direct access to it as custody is vested in a separate entity, the Pension Fund Custodian (PFC).

In essence, while the PFAs make day-to-day investment decisions in line with investment regulations issued by the National Pension Commission (PenCom), it is the responsibility of the PFC to effect payments for the investment and receive dividends or profits therefrom on behalf of the PFA, while PenCom ensures that both parties adhere strictly to regulations governing the pension funds.

Further checks show that the main reason of separation of custody from management and supervision has resulted in enhancing accountability. The ring-fencing of pension fund assets and regulatory non-interference have resulted in the consistent growth in a large pool of pension assets.

Daily monitoring of pension fund investments

PenCom requires all PFAs to submit daily valuation reports on the pension fund investments. These reports provide the details and value of all investments made with the pension funds at the end of each day. The implication is that PenCom is able to ensure that investments are in accordance with investment regulations and can identify any infraction immediately for corrective action. In effect, therefore, the safety of the pension funds is monitored by PenCom at all times.

Separating pension funds from pension operators’ assets

Findings by Weekend Trust show that there is a complete separation between pension funds and the assets of pension operators. This means that an operator is not allowed to combine its own company funds with the pension funds, which are held in exclusive accounts and kept in safe custody by the Pension Fund Custodians.

In effect, a pension operator’s insolvency will not impact negatively on the pension funds. Therefore, where an operator is incapacitated by capital inadequacy, for instance, the pension funds will simply be transferred to another solvent operator under the direction of PenCom. This separation of pension funds has further assured the transparency of the CPS.

Strict regulation of investments

The investments of pension funds by PFAs are strictly regulated by the Investment Regulation, issued by PenCom. The regulation prescribes allowable investment outlets and sets upper limits in percentage of funds that can be invested. This ensures that risks are properly managed in order to ensure the safety of the funds. The PFA’s exclusive responsibility for investment decisions is only limited by compliance with the provisions of the regulation.

Consequently, pension funds are secured for the sole purpose of providing retirement and terminal benefits for the RSA holders.

As a result, pension funds are prohibited from being given out as loans or applied as collateral for loans. This has prevented the depletion of pension funds through non-performing loans taken by the RSA holder or the PFA granting a direct loan to a third party.

Some shortfalls of CPS – Expert

Speaking to Weekend Trust, a public affairs analyst, Mark Jimoh, said although the scheme had recorded significant progress in terms of asset growth and reforms, it is not perfect and has some loopholes that should be corrected over time.

“These shortfalls include a lack of prompt remittance of contributions by employees and employers, leading to delays in pension benefits. I recall that even the director-general last year mentioned how some employers deliberately refused to remit their workers’ pension, even after deducting them running into millions. So that area has to be addressed vigorously.

“Also, inadequate access to pension benefits as at, and when due, with many pensioners facing difficulties in accessing their funds, is also a challenge the authorities should address wholeheartedly. This also adds to the low level of public awareness and knowledge on the workings and benefits of the CPS, necessitating continuous education efforts by PenCom and the PFAs.

“Another shortfall is the low penetration in states. However, above all, timely payment of benefits and enhancements is critical to the success of the scheme,” he added.

Pension funds hit N27trn as at December 31

Meanwhile, further checks by Weekend Trust show that Nigeria’s pension fund assets closed 2025 at N27.45 trillion, according to the unaudited pension funds industry portfolio report for the period ended December 31, 2025.

According to the figures released by the National Pension Commission, the year-end figure represents a net increase of N399.27 billion over November 2025, when total pension assets stood at N27.05 trillion. On a year-on-year basis, the total pension fund assets grew by N4.94 trillion, rising from N22.51 trillion in December 2024, representing an annual growth of about 21.9 per cent.

The bulk of the year-on-year expansion came from the Retirement Savings Account Funds, particularly Fund II and Fund III. RSA Fund II assets jumped from N9.24 trillion in December 2024 to N11.52 trillion in December 2025, an increase of approximately N2.28 trillion. RSA Fund III grew from N5.92 trillion to N7.02 trillion, adding about N1.10 trillion year-on-year. RSA Fund IV expanded from N1.62 trillion to N2.25 trillion, reflecting a rise of roughly N630 billion over the period.

Assets under Existing Schemes also rose materially from N2.79 trillion in December 2024 to N3.28 trillion in December 2025, while CPFAs increased modestly from N2.60 trillion to N2.69 trillion.

In the period under review, holdings of the federal government’s securities increased sharply year-on-year, climbing from N14.11 trillion in December 2024 to N16.33 trillion in December 2025. Treasury bills also edged higher year-on-year, reinforcing the industry’s conservative risk posture. Investment in domestic ordinary shares surged from N2.24 trillion in December 2024 to N3.96 trillion in December 2025, representing a year-on-year increase of approximately N1.71 trillion. This reflected improved equity market valuations and higher exposure, particularly within Fund II and Fund III portfolios.

RSA membership expanded from 10.58 million contributors in December 2024 to 11.04 million by December 2025, adding more than 450,000 new contributors over the year and reinforcing steady contribution inflows into the system.

On a month-on-month review, the December expansion was driven largely by valuation gains and fresh inflows into Retirement Savings Account Funds, particularly Fund II, Fund III and Fund IV, which together account for the bulk of industry assets.

Nigeria’s Contributory Pension Scheme has recorded a Retirement Savings Account (RSA) for holders – December 31 is 11,040 2025, from 11,009,000 as at November 30. The figure marks a steady increase in pension enrolment.

Pension funds, custodians

Checks by Weekend Trust show that there are about 20 Pension Fund Administrators and three Pension Fund Custodians (PFCs) as seen on the website of the National Pension Commission

They are Access ARM Pensions Limited, Cardinal Stone Pensions Limited, Citizens Pensions Limited, Crusader Sterling Pensions Limited, FCMB Pensions Limited, Fidelity Pension Managers Limited and Guaranty Trust Pension Managers Limited

Others are Leadway Pensure PFA Limited, Nigerian University Pension Management Company (NUPEMCO), NLPC Pension Fund Administrators, Norremberger Pensions Limited, NPF Pensions Limited, OAK Pensions Limited, as well as Parthian Pensions Limited

Also on the list is Pensions Alliance limited, Premium Pension Limited, Stanbic IBTC Pension Managers Limited, Tangerine APT Pensions Limited, Trustfund Pensions Limited and Veritas Glanvills Pensions Limited

In the same vein, Pension Fund Custodians as approved by the regulator include First Pension Custodian Nigeria Limited, UBA Pension Custodian Limited and Zenith Pensions Custodian Limited

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