Pension Fund Administrators (PFAs) are not allowed to invest pension funds or assets in shares or securities issued by it, its Pension Fund Custodian (PFC), a shareholder of the PFA or its PFC.
PFAs are also not allowed to sell pension fund assets to themselves, shareholder, director, affiliate or associate, employees, spouse of PFA employees, affiliates of any shareholder of the PFA.
The National Pension Commission (PenCom) could impose restrictions on investments by PFAs to protect the Retirement Savings Accounts (RSAs). Any PFA that fails to comply with the PRA 2014 will be penalised by the Commission, the Director-General, Mrs. Aisha Dahir-Umar, has said.
She told The Nation that the commission would not compromise on the major objectives of pension fund investments, which include safety of the assets and maintenance of fair returns on investments.
She explained that pension funds are invested in varied but quality financial instruments, all tailored toward ensuring the safety of pension assets and fair returns as enshrined in Section 85 (1)of the Pension Reform Act 2014 (PRA 2014), Mrs. Dahir-Umar stated that the funds have witnessed continuous growth since the Contributory Pension Scheme (CPS) was introduced in 2004.
She noted that this is evident in the accumulated value of the pension assets which has risen to N14.27 trillion as of June 30, 2022. She further stated that Section 85 (2) of the PRA 2014 states: “Pension Fund Assets shall only be invested in accordance with the regulations and guidelines issued by the Commission.”
Accordingly, she said, the Commission issued the Regulation on Investment of Pension Fund Assets (Investment Guidelines) to guide Licensed Pension Fund Operators in investing pension funds and assets.
She said: ‘Based on Investment Guidelines, pension funds and assets shall be invested in bonds, treasury bills and other securities issued by the Federal Government, state and local governments that qualify.
“Furthermore, pension funds can also be invested in debentures, redeemable shares and other debt instruments issued by corporate entities and listed on a Stock Exchange under the Investment and Securities Act and ordinary shares of public limited companies listed on a Stock Exchange under the Investment and Securities Act.
“Finally, pension funds can be invested in bank deposits and securities, real estate development investments, specialist investment funds and other financial instruments as approved by the Commission from time to time.”
She added that statistics showed that as at the end of the second quarter of 2022 (Q2) to end of last June, N8.31 trillion was invested in Federal government bonds, N475.64 billion in Federal Government treasury bills, N13.83 billion in agency bonds and N161 trillion in State Government securities.
“Similarly, a total of N1.19 trillion was invested in corporate debt securities, N2.14 trillion in money market instruments and N56.13 million in mutual funds during the same period,” she added.