The National Pension Commission has warned Pension Fund Administrators against investing in the Additional Tier-1 Capital of Deposit Money Banks.
In a circular addressed to all licensed Pension Fund Operators, which was signed by the Director, Surveillance Department, A.M. Saleem, PenCom said that the definition of AT1 doesn’t meet the provisions of assets that PFAs can invest in.
The Commission said that it has recently been inundated with requests from Pension Fund Administrators seeking to invest pension fund assets in Additional Tier 1 Capital instruments of banks.
“AT1 as approved by Central Bank of Nigeria regulations ‘is perpetual, i.e., there is no maturity date and there are no incentives to redeem.’”
“This provision is contrary to Section 2.4 of the Regulations on Investment of Pension Fund Assets, which states that ‘PFAs shall not invest Pension Fund Assets in instruments that are subject to any type of prohibitions or limitations on the sale or purchase of such instrument, except open/close-end/hybrid funds and specialist investment funds allowed by these Regulations.’”
“Arising from the foregoing, PFAs cannot invest pension fund assets in Additional Tier 1 Capital instruments issued by Deposit Money Banks.”
