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A Mega-Merger in Nigeria’s Pension Space
The National Pension Commission (PENCOM) has approved the merger between ARM Pension Managers (PFA) Limited and Access Pensions Limited to form a new entity named Access ARM Pensions Limited.
This merger reflects the recent broader trend in the financial services industry where firms are consolidating to remain competitive, optimize operations, and better serve customers.
According to the management of PENCOM, “the merger is expected to result in the achievement of economies of scale, improved operational efficiency of the new entity as well as improved service delivery to Retirement Savings Account (RSA) Holders.”
Also, this might lead to more robust portfolio management to ensure that pension fund administrators remain capable of meeting their obligations to retirees.
At the end of the first half of 2024, the total number of Retirement Savings Account (RSA) registrations stood at 10.4 million while the total remittance of pension contribution stood at ₦10.9 trillion.
The total remittance of pension contribution increased by 120% between Q1 2024 and Q2 2024. It increased from ₦314.17 billion in Q1 2024 to ₦692 billion in Q2 2024.
The public sector remains the highest pension contributor to total pension remittance. It contributed a total of ₦543.56 billion, while the private sector contributed ₦462.61 billion in the first half of 2024.
In 2020, and particularly after the consolidation of the Nigerian pension sector in 2021, the regulatory framework underwent a significant change. The National Pension Commission (PENCOM) increased the Minimum Regulatory Capital Requirement (shareholders’ fund) for Pension Fund Administrators (PFAs) from ₦1 billion to ₦5 billion.
As a result, the industry has seen 9 major mergers and acquisitions. These consolidations were primarily driven by the need to meet the new capital requirements and enhance operational efficiency across the industry.
An analysis of the Retirement Saving Account registrations across the Pension Fund Administrators (PFA) revealed that Access Pensions Limited and ARM Pension Managers (PFA) Limited were among the top 5 PFA in Nigeria before the merger.
The merger will enable the new entity, Access ARM Pensions Limited, to be the second largest Pension Fund Administrator in Nigeria.
According to the Former Chief Executive of Access Holdings Plc, Late Dr Herbert Wigwe, “‘We are pleased to have reached this transformative milestone in our pension fund administration journey. The proposed combination of ARM Pension with Access Pensions will not only create sustainable stakeholder value but will also contribute positively to the growth and development of the pension industry. We anticipate an exciting future for the combined entity.”