New equity limits will boost pension returns, deepen stock market- Analysts

Capital market analysts have welcomed the decision by the National Pension Commission (PenCom) to raise equity investment limits for Retirement Savings Account (RSA) funds.

The experts in separate interviews with our correspondent on Wednesday, said the review would strengthen long-term investment flows into the stock market and improve income potential for pension contributors.

The National Pension Commission (PenCom) recently revised Section 9 of its Sept. 2025 investment regulation to increase the allowable limits for investments in ordinary shares under the RSA funds to give PFAs more opportunities to invest in equities.

Under the new limits, RSA Fund I has been raised from 30 per cent to 35 per cent; RSA Fund II from 25 per cent to 33 per cent; RSA Fund III from 10 per cent to 15 per cent; and RSA Fund VI Active from 25 per cent to 33 per cent.

The Vice President of Highcap Securities Ltd., Mr David Adonri, said the review would enhance income generated from pension investments and support the equities market, which had shown sustained stability in recent years.

“It is a welcome development for the equities market and it also enhances the income derived from the investment of the RSA.

“Now that the equities market is performing very well and it has been sustained for several years, there is that assurance of stability,” he said.

Adonri noted that the move could result in improved retirement benefits over time, as higher investment returns may lead to periodic reviews of retirees’ monthly pensions.

He, however, cautioned that increased exposure to equities also comes with higher risk and urged Pension Fund Administrators (PFAs) to adopt safeguards.

“As equities increase in the investment portfolio of the RSA, the risk also increases. We are hoping that the administrators will take extra measures in mitigating the expected risks by using risk-mitigating derivatives,” he said.

Adonri noted that the development would be beneficial to the equities market, the derivatives market and retirees in the long run.

Also speaking, the Chief Executive Officer of Wyoming Capital and Partners, Mr Tajudeen Olayinka, described the policy adjustment as a realistic step that had been overdue.

According to him, pension funds designed for contributors with higher risk appetite should not be concentrated mainly in low-yield instruments when equities offer stronger return potential.

“When you are setting up a pension fund and the account holder is interested in an aggressive fund, it does not make sense to keep all the funds in less-yielding instruments.

“Equities offer benefits that you cannot get elsewhere, despite the risks involved,” he said.

Olayinka said the review could gradually improve pension payouts, adding that the size of monthly benefits depends largely on returns generated from investments.

“You cannot expect pension funds to pay what they have not earned. So, this is a way of improving returns, even though the increase is still moderate,” he said.

Also, Dr Babatunde Raimi, a pension and retirement coach said the new equity limit would create greater opportunities for pension savings to grow, even though the market might experience occasional short-term fluctuations.

Raimi noted that increasing the portion of pension funds invested in company shares would also support the growth of Nigerian businesses, boost job creation, and strengthen the economy.