Pension contributors, retirees get more investment windows
as PenCom expands multi-fund structure to 6...adds micro-pension, non-interest instrument
Pension contributors and retirees in Nigeria will now have more choices regarding where their pension fund assets will be invested, BusinessDay has learnt.
This is as National Pension Commission (PenCom), the industry regulator, has expanded the multi-fund structure from the initial four to six.
Whereas the initial multi-fund structure which was implemented in July 2018 covered Funds I-IV, the Commission has added Fund V, which is the micro-pension fund, and Fund VI, which is the noninterest-compliant instrument, also called Sharia-compliant or ethical funds.
The inclusion of micro pension and noninterest-bearing funds as part of the multi-fund structure is expected to enhance earnings growth of pension fund assets, said Ronke Adedeji, president, Pension Fund Operators Association of Nigerian (PenOp), who confirmed the development.
Pension fund assets under management rose to N8.74 trillion as at the end of February 2019, while the number of retirement savings account (RSA) holders stood at 8.55 million.
“The expectation is that practically every Nigerian adult will have somewhere to fit in,” said Adedeji, who is also managing director/CEO of Leadway Pensure, a pension fund administrator.
She added that the noninterest-bearing funds would take care of the Muslim faithful and Sharia-compliant citizens who prefer that their contributions are invested in a particular way that aligns with their belief.
Noninterest-compliant instruments are financial securities and specialist investment funds that comply with the provisions of Islamic Commercial Jurisprudence (Shariah) and any other established noninterest principles as approved by the Advisory Council of Experts, or any other body, constituted by the Securities and Exchange Commission (SEC) and/or the Central Bank of Nigeria (CBN) from time to time.
In a new circular to PFAs titled ‘Regulation on Investment of Pension Fund Assets’, which was seen exclusively by BusinessDay, PenCom said the multi-fund structure would comprise Fund I, Fund II, Fund III and Fund IV (retiree fund), and they would differ among themselves according to the overall exposure to variable instruments.
The regulator added that there would be additional two funds – Fund V (micro pension fund) which will be for contributors under the Micro Pension Scheme, and while Fund VI (non-interest fund) for contributors who choose to have their pension contributions invested in non-interest money and capital market products.
The Commission also mandated the PFAs, effective from the date of implementation of the multi-fund structure, to allocate contributors to various fund types.
According to PenCom, membership of Fund I shall strictly be by formal request by a contributor; Fund II shall comprise active contributors who are 49 years and below as at their last birthdays; active contributors who are 50 years and above as at their last birthdays shall be assigned to Fund III; while Fund IV shall strictly be for RSA retirees only.
In the same vein, the Commission said Fund V shall strictly be for contributors under the Micro Pension Scheme, while Fund VI shall be for those that choose to have their contributions invested in non-interest money and capital market products.
PenCom also stated that where the investment is in a non-interest-compliant money market instrument, it shall be in compliance with the CBN’s guidelines for the regulation and supervision of institutions offering non-interest financial services.
There are 274,000 retirees currently receiving their monthly pensions, either through the programmed withdrawal (PW) or insurance annuity, according PenOp.