PenCom, PFAs partner to improve return on investments of pension assets
To address the further decline of pension assets’ investment in foreign money markets, the Pension Fund Administrators (PFAs) and the National Pension Commission (PenCom) have joined forces to develop a framework that will enable pension funds to be invested in dollar-denominated assets within and outside Nigeria.
This was revealed in the monthly report posted through the commission’s website, showing pension fund investment in foreign money markets dropped significantly by 56.25 per cent from N32 billion in September 2022 to N18 billion in December of the same year.
According to the breakdown as displayed on PenCom’s website, the total investment in the markets made by the Pension Fund Administrators (PFAs) in September 2022 stood at over N32 billion, while that of October dropped to a little over N24 billion.
Sustaining the same decline, the investment in the portfolio dropped from N24 billion to N17 billion in November before rising slightly to N18 billion in December.
It was believed that this would help sustain the value of the pension assets and for the benefit of the contributors.
Although investment in the portfolios had maintained a decline throughout the months indicated, the total assets have continued to maintain a steady rise since the scheme was inaugurated over 12 years ago.
Currently, at N14.99 trillion and over nine million contributors across Nigeria, the funds have been spread across other instruments by the PFAs as closely supervised by the regulator.
According to the investment guidelines in the sector, all fund managers under the scheme are expected to conduct their investment activities in line with the requirements of the Regulation on Investment of Pension Fund Assets (Investment Regulation) issued by the National Pension Commission.
The investment regulation is the reference document on all investment activities carried out by pension operators in the country and sets out rules and standards for investing pension funds.
The Investment Regulation, specifically, provides the allowable markets, allowable instruments, quality requirements, rating requirements, and general principles for investing pension fund assets by the fund managers.
Determining the regulator’s vision to secure the contributors’ assets, the Director-General, PenCom, Aisha Dahir-Umar, said the agency’s efforts at diversifying investments of pension funds and preventing inflation had gradually begun to yield results.
According to her, further breakdown of the investment shows that N9.64 trillion or 64.33 per cent of the assets was invested in the Federal Government of Nigeria’s Securities, N1.66 trillion invested in corporate debt securities, N1.98 trillion in money market securities and N82.8 billion in mutual funds among other portfolios.
According to the Commission’s ‘Report on the pension industry portfolio for the period ended December 31, 2022,’ contributors in the scheme rose slightly by 333,002 from 9.529 million at the end of 2021 to 9.862 million in the corresponding period.
Recall that in the 2022 third-quarter report, Dahir-Umar said: “Despite the overwhelming headwinds in the global economic climate and the country’s challenging macroeconomic environment, the pension fund assets under management increased.
“The performance, in the growth of the AuM, points to the fact that the pension industry will continue to deliver value and benefit to its stakeholders and the nation’s economy.”
During the period under review, the director-general said PenCom steadily pursued increased diversification of pension fund portfolios by ramping up efforts aimed at ensuring a sustained investment of pension funds in alternative asset classes and structured infrastructure projects that meet the stringent requirements as enshrined in the regulation for the investment of pension fund assets.
According to her, efforts were ongoing to ensure that the annualised average rates of return of pension funds across Retirement Savings Accounts and legacy funds were above headline inflation rates.
She said: “Perhaps, the most significant achievement recorded in the third quarter of 2022 was the successful issuance of guidelines on accessing RSA “Balance towards payment of equity contribution for a residential mortgage.