The National Pension Commission (PenCom) has directed all Pension Fund Administrators (PFAs) and Pension Fund Custodians (PFCs) to report foreign currency pension contributions above $10,000 to the Nigeria Financial Intelligence Unit (NFIU) within 24 hours of receipt.
The directive, released on Tuesday in the new Guidelines on Foreign Currency Pension Contributions, seeks to expand participation in the Contributory Pension Scheme (CPS) to Nigerians in the diaspora and residents earning in dollars, while tightening anti-money laundering controls.
Key requirements under the guidelines
PenCom explained that PFAs and custodians must comply with Section 3(1) of the Money Laundering (Prevention and Prohibition) Act 2022. This provision mandates reporting all transactions above the $10,000 threshold, including details of the sender, purpose, and transfer amount.
- Suspicious contributions below $10,000 must also be flagged in line with the Financial Intelligence Unit Act 2018.
- Contributions must be made strictly in U.S. dollars.
- Nigerians abroad are to remit through Non-Resident Nigerian Ordinary Accounts, while local contributors must use domiciliary accounts linked to custodial banks.
- All contributors must undergo strict Know Your Customer (KYC) checks, providing valid ID, passport, and next-of-kin details.
PenCom stressed that the rules align Nigeria’s pension framework with global compliance standards and protect against money laundering and terrorism financing.
Access and investment rules
To safeguard funds, contributors must split savings:
- 60% may be accessed under limited conditions before retirement.
- 40% must be preserved until retirement.
Withdrawals are capped at twice a year and only after six months of the initial deposit.
PFAs are also required to:
- Notify contributors of receipts within 24 hours.
- Return contributions that cannot be credited within 48 hours.
- File daily and monthly reports to PenCom covering contributions, withdrawals, and portfolio valuations.
Foreign currency contributions will be pooled into a dedicated Dollar Fund, invested mainly in:
- Dollar-denominated securities such as Eurobonds and supranational bonds.
- Federal Government-backed instruments.
- Exchange-traded funds.
PenCom also imposed strict risk controls, capping investments in AAA-rated foreign corporate bonds at 5% and BBB-rated instruments at 1%.
What it means for contributors
Contributions and returns will remain tax-free if held for at least five years. However, early withdrawals attract tax penalties, to be remitted to relevant authorities within 21 days.
For Nigerians abroad, this provides a structured way to save for retirement in dollars, protecting pensions from naira depreciation. For regulators, the framework improves visibility over dollar inflows and strengthens safeguards against illicit financial flows.
PenCom described the initiative as “not only about broadening participation in the CPS but also about ensuring integrity, transparency, and security of pension contributions in foreign currency.”
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