PenCom expands investment choices for PFAs with Non-Interest Fund
THE NATIONAL PEN SION COMMISSION (PenCom) has expanded the investment portfolio choices that Pension Funds Administrators (PFAs) can invest the pension funds under their management, with the introduction of the Non-Interest Fund (Fund VI) into Nigeria’s pension asset investment mix.
Peter Aghahowa, the head of corporate communications of PenCom disclosed that the commission has also issued an operational framework on it to pension contributors and retirees.
The Non-Interest Fund (Fund VI) is a fund type managed by PFAs whose assets are invested in instruments that are both ethical and non-interest bearing in line with Islamic Shariah principles.
Aghahowa in a statement disclosed that the initiative was in furtherance of the implementation of the Multi-Fund Investment Structure, which seeks to provide investment portfolio choices to pension contributors and retirees.
He also said the fund would be separated into two funds for Active RSA holders and Retirees, respectively, as all Pension Fund Administrators (PFAs) are required to create and maintain the Non-Interest fund for interested Retirement Savings Account (RSA) holders.
“The Non-Interest Fund is a fund that complies with the provisions of Islamic Commercial Jurisprudence and any other established non-interest principles, as approved by the Financial Regulation Advisory Council of Experts (FRACE) or any other body constituted by the Central Bank of Nigeria and the Securities and Exchange Commission, from time to time. The FRACE has certified that the operational framework issued by the commission complies with non-interest (Shari’ah) finance principles,” he said.
“RSA holders in Fund I, II, III and retirees in Fund IV are eligible to move their RSA contributions to the Non-Interest Fund (Fund VI) by making a formal request to the PFA in line with the provisions of the RSA Multi-fund Implementation Guidelines and Section 7.6 of the investment regulation dealing with transfers between fund types within a PFA. The Non-Interest Fund offers a viable alternative to the conventional interest-based financial instruments for pension funds investment,” Aghaghowa stated.
Meanwhile, the board of the National Pension Commission has in a circular issued to all licensed pension fund administrators (PFAs) at its 49th board meeting, approved a fee structure for the Non-interest Funds (Funds VI active and Retiree). The commission stated that the maximum fee
Issues operational framework for Fund VI Sets 1.5%, 7.5% maximum fee rates
rates on the funds for the various parties shall be 1.65 percent for the active fund, which is asset based; and 7.5 percent flat for the retiree fund, which is income based.
Breaking down the fee structure, the commission highlighted that the maximum rate shall be 1.20 percent asset based fees on active funds with the PFAs and 5 percent flat income based for the retiree fund. For the PFC, it will be 0.25 percent for the active fund and 1.5 percent for the retiree fund, while PenCom as a commission, charges 0.2 percent for active fund and 1 percent flat for retiree funds.