Crediting interest rate
Fund chief executive officer Viliame Vodonaivalu announced on June 24, 2022 that the FNPF Board had approved a crediting interest rate of 6 per cent for its members for the fiscal year ending June 30, 2022.
FOR many of our members, the end of the fiscal year is eagerly anticipated, as it is when the Fiji National Provident Fund Board announces the interest based on the year’s financial performance.
Despite the erratic external changes throughout the world, the fund has advanced with our growth objectives, reiterating our solid financial position, to provide interest to our members.
Fund chief executive officer Viliame Vodonaivalu announced on June 24, 2022 that the FNPF Board had approved a crediting interest rate of 6 per cent for its members for the fiscal year ending June 30, 2022.
The Fund Actuary validated the rate confirming that it will not put undue stress on the FNPF’s solvency criteria - a validation that is a mandatory requirement in the FNPF Act.
As a result of this interest payment, a total $F371 million was credited into the FNPF accounts of 392,175 members on 30 June.
The growth in interest this year (last year was 5 per cent) is related to the higher returns achieved from investments that have been strategically managed by the FNPF.
A predominate component of the fund’s investment return is the Government Bond income and equity investments return. The interest is also attributed to infrastructure investments and the recovery of the Tourism industry since borders opened in December 2021.
Having a diversified investment portfolio has been a strength for the Fund minimising the overall risks and decreasing the impact of market volatility as experienced during the pandemic.
The 6 per cent interest rate serves as a reassuring signal to our members that the Fund and its future are secure and confirms that the FNPF continues to be the best option for long-term investments.
“The fund has now distributed over $1.6 billion in interest payments to members for the past five years,” said Mr Vodonaivalu.
This is a reflection of the fund’s investment choices, which have allowed the portfolio to grow to its current size.
FNPF will continue to explore more investment possibilities to maximise member funds’ growth and get them ready for a
more financially secure retirement.
The interest amount which each member receives depends solely on their average daily balance over the year and not calculated on the closing balance.
The more balance you have, and less withdrawal taken, the more interest you will earn on your total balance. With compounding interest, this is the best way to grow your funds.
Members need to consistently save for a reasonably long time, to fully realise the effect of the compound interest mechanism.
Any withdrawal will incur a negative impact on your retirement savings and will affect your capability of having a secure future.
The fund’s financial performance for the current fiscal year (1 July 2021 – 30 June 2022) will be fully detailed in our Annual
Report 2022, which will be published later this year.
John has $2000 opening balance and his FNPF account has contribution and withdrawal activities transpiring within the financial year (from 01-07-21 to 30-06-2022) as shown in the first three columns of the Table 1.
The fourth column derives the member’s daily average balance (DAB) using this formula: $A x N/M where:
$A is either the Opening balance amount or the Transaction Amount.
N is the number of days measured from the Transaction Effective Date until the date interest is credited (which is 30-062022
■ ■
by the Board.
6. What if I am unemployed during the financial year? in the transaction table)
M is the total number of days in the financial year (this is 365 for financial year 2022).
Note: Summing up the amounts calculated using this formula on the opening balance and the transactions gives the same amount as that derived using the daily average balance calculation.
The product of this sum and the rate declared for the financial year gives the amount of interest that is credited to the member’s account (fifth column).
■
9. How do I calculate my daily average balance?