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  • Sunday, June 23, 2024
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The Trusted Advisors Legal Digest: Code of corporate governance for licensed pension operators

Authors: Olawunmi Ojo and Elizabeth Olalekan


The code of corporate Governance for Licensed Pension Operators details rules based on international best practice to guide Pension Fund Administrators (PFAs) and Pension Fund Custodians (PFCs) on standard corporate governance structures needed in order to ensure an efficient and stable operating structure.
The Code was created due to the need to ensure proper corporate governance for PFAs and PFCs and to safe guide the interest and boost the confidence of the stakeholders.

It is pertinent to state that every worker must receive his/her retirement benefit as at when due. Hence the importance of the creation of a Code of Corporate Governance for Licensed Pension Operators

This article sets out to highlight the importance and benefits of the Code of Corporate Governance for Licensed Operators, the challenges in place and recommendation.

Definition of key terms

Corporate Governance​

Corporate governance is the system by which companies are directed and controlled. It is what the Board of Directors of a company does and how it sets the values of the company, which is different from the day-to-day operational management of the company by full-time executives.
Corporate governance refers to the processes and structure by which the business and affairs of the company are directed and managed, in order to enhance long term shareholder value through enhancing corporate performance and accountability, whilst taking into account the interests of other stakeholders.


It is a fixed amount, other than wages, paid at regular intervals to a person or to the person’s surviving dependents in consideration of past services, age, merit, poverty, injury or loss sustained, etc.

Pension Fund Custodians

It is a company licensed by the National Pension Commission to keep money and assets in the Retirement Savings Account (RSA) in trust for the employee on behalf of the PFA. It is the custodian of the pension funds assets and acts to the order of the PFA in line with regulations.

Pension Fund Administrator

It is a company licensed by the National Pension Commission to manage and invest the pension funds in the employee’s Retirement Savings Account (RSA). PFA manages the pension funds through various investments in accordance with the investment guidelines by the National Pension Commission.

Purpose of the Code

• To ensure Transparency amongst the Pension Operators

• To ensure a clear delineation between the owners, Board of directors and the Executive Management

• To ensure a clear division of roles and responsibilities between the various levels of authority


Below is the list of Pension Operators in Nigeria with offices in different parts of the country.

1. The National Pension Commission (PenCom)

2. The Pension Fund Administrators (PFAs)

3. Closed Pension Fund Administrators (CPFAS)

4. Pension Fund Custodians (PFCs)

5. Pension Operators Secretariat (PenOps)

6. Pension Transitional Arrangement Directorate (PTAD)


There are certain regulatory framework that regulates the affairs of the Pension Operators in Nigeria and some of them are;

1. The Pension Reform Act, 2014

2. Code of Ethics and Business Practices for Licensed Pension Operators 2008

3. Code of Corporate Governance for Licensed Pension Operators 2008

4. The Nigerian Code of Corporate Governance 2018

5. Guidelines on Corporate Governance for Pension Operators in Nigeria 2021


The National Pension Commission developed the Corporate Governance Guidelines for Pension Fund Operators (PFOs), which is consistent with the Pension Reform Act (PRA) rules, regulations and guidelines of the Commission. This Guideline is aimed at strengthening corporate governance practice and also assist Pension Fund Operators in meeting their responsibilities and ensuring accountability. This is a measure to ensure that every worker receives his or her retirement benefits promptly and also regulate the affairs of the Pension Operators.

The Code was developed to institutionalize corporate governance best practices in Pension Fund Operators in Nigeria, promote awareness of essential corporate values and ethical practices in the industry, show a clear delineation of roles, board and management of the Pension Fund Operators. The Code aims to set out rules based on best practices to guide PFAs (including CPFAs) and PFCs on the structure and processes to be adopted towards achieving optimal governance set up.

The Code states the minimum Corporate governance requirements to follow to ensure that governance policies are entrenched in the companies. The Code majorly deals with two broad areas: board issues and industry transparency.


To ensure balance on the Board, the minimum numbers of the non-executive members asides the Chairman must equate number of the executive members where applicable. There must also be at least one Independent Director that has no relationship with the company and must not be perceived to interfere with the judgment that are in the best interests of the Company.

It is important to note that for a director to be considered as independent, he must have fulfilled the conditions below;

• he must not have been employed for any form of service by the company or any related companies for the current year or the past three financial years

• he must not have any immediate family member that has been employed for any form of service by the company or any related companies for the current year or the past three financial years

• he must not have accepted compensation from the company or any related companies other than compensation for Board service for the current year or the past three financial years.

• he must not be a substantial shareholder or partner with more than 5% or more equity interest, or an executive officer of any profit-making organization to which the company made or from which the company received significant payments, in the current or past three financial years.

However, if the Pension Fund Administrator (PFA) or Pension Fund Custodian (PFC) intends to make a director independent where there exist one or more of the conditions stated above, it shall disclose in full to the Commission the nature of the director’s relationship and explain why the director should be considered independent.

The Code also makes a provision that the office of the Chief Executive Officer and Chairman shall be separate to ensure appropriate balance of power but in circumstances where it is not separate, the relationship between the Chairman and the CEO must be disclosed to the Commission whether they are related.

Responsibilities of Directors

After the directors have been duly appointed in line with the provision of the Code of Corporate Governance for Licensed Pension Operators, the directors are to set objectives for the company’s business operations and make sure that the company has an appropriate strategy and management for achieving the objectives.

The Board is also required to have an effective management team to monitor and evaluate the performance of the management team on a regular basis. The Board is to endeavor to give accurate picture of the company’s progress, profitability, financial position and risks to the owners of the company and also ensure that there is a satisfactory process to monitor the company’s compliance with laws and regulations governing its operations.

Performance Evaluation of the Board

The Board on an annual basis is required to undertake a formal and rigorous evaluation of its own performance as well as that of its committees and individual directors. The valuation is to show the contribution of each director to the Board and the result of the evaluation shall be prepared in two copies, one to be submitted to the Commission along with the company’s annual report on corporate governance.


This code deals basically on conflict of interest between The Public Fund Administrators and Public Fund Custodians.

The Code of Corporate Governance for Licensed Pension Operators states that The PFA shall not have any relationship with the PFC which it chooses to do business, as specified in the Code of Ethics and Business Practices, issued by the Commission.
While a PFA/PFC engages a service provider that has a relationship with it on arms length basis and customary, disclosures shall be made in their audited financial statements. (Example is when the service provider has common ownership or directorship or is an immediate family member of a shareholder or director of a PFA which the PFA appoints).

In order to avoid conflicts of interest, spouses of Licensed Pension Fund Operators are prohibited from working at the Commission and vice versa.

The Code provides that the company’s Remuneration policy should be disclosed in the annual reports, alongside remuneration for all directors. The Board is tasked with the duty to report to the shareholders each year on remuneration. The report should also show the company’s policy on directors’ remuneration and draw attention to factors specific to the PFA/PFC.

Result of Non-Compliance

The Code encourages the board to ensure that the company is in compliance with the Code and other applicable regulations. These Code was introduced to strengthen and promote a culture of regulatory compliance.

Non-compliance with the provision of the Code attracts sanctions to be prescribed by the Commission


The Code of Corporate Governance for Licensed Pension Operators advocates for a good governance practice, common value system within the Pension Operators and also promotes accountability to the shareholders and the owners.




The Trusted Advisors is a leading Nigerian full-service law firm providing cutting-edge and timely legal solutions and services to its clients.

Disclaimer: This article provides general information and does not constitute legal advice. For specific legal advice, readers are advised to contact us on info@trustedadvisorslaw.com

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