PenCom Releases The Amended Regulations on Investment of Pension Fund Assets, 2017

Fund Types

Contributors/Investors

Thresholds

Fund I

Strictly by formal request from a contributor and suitable for contributors who want to invest in high risk projects with higher rewards.

75% maximum and 20% minimum of Portfolio Value

Fund II

Active contributors who are 49 years and below as at their last birthdays.

55% maximum and 10% minimum of Portfolio Value

Fund III

Active contributors who are 50 years and above as at their last birthdays.

20% maximum and 5% minimum of Portfolio Value

Fund IV

Exclusively for retirees

10% maximum and 0% minimum of Portfolio Value

Active Choices and Transfers between Fund Types within a PFA

Subsequent to the implementation of the Multi-Fund Structure, contributors are allowed to choose the Type of Fund in which they desire to be assigned, subject to the following conditions:

  1. An active Contributor in Fund II who wishes to be assigned to Fund I shall make a formal request to the PFA;

  2. An active Contributor in Fund III who wishes to be assigned to Fund II shall make a formal request to the PFA.

  3. An RSA Retiree or active Contributor who is 50 years and above shall not be allowed to choose Fund I. 

The Amended Regulations also allow an active contributor to switch from one Fund Type to another Fund Type within a given PFA, once within a 12 month period without paying any fees, subject to a formal application to the PFA by the contributor.

Inclusion of Islamic Bond (Sukuk) in the Class of Allowable Instruments

Sukuk Instruments (Islamic Bond) issued by eligible State and Local Governments or State Government Agencies or wholly owned companies of a State Government, as an asset class, have now been included in the list of Allowable Instruments (under section 4) in which PFAs may invest the pension fund assets under management.  It should be noted that Sukuk, as a type of Bond, was not mentioned in the 2012 Regulations.

New Quality Requirements

  1. AUDITING OF ANNUAL FINANCIAL STATEMENTS – Under the 2012 Regulations, where a PFA intends to invest the pension fund assets in an Infrastructure Fund or a Private Equity Fund (PE), the PFA was required to ensure that “all annual financial statements of the Infrastructure Fund or PE shall be audited by reputable firms of chartered accountants”. However, by sections 5.2.3(iii)(c) and 5.2.11(i) of the Amended Regulations, the accounting firms required to audit the annual financial statements of the Funds in which the PFA seeks to invest, must in addition to being reputable firms of chartered accountants, be registered by the Financial Reporting Council of Nigeria (FRC).