Pension, capital market operators parley for increased liquidity, stability
Pension Fund Operators Association of Nigeria (PenOp) and the capital market community, including regulators and the players are working on collaborations that will support growth, increase market liquidity and stability of the country’s bourse.
PenOp, who manages the countries thriving pension assets currently standing at over N8.1 trillion, believes that the collaboration with capital market operators will further boosts Nigeria’s investment market.
According to the PenOp, the recently introduced Multi-fund Structure will spike activities in the capital market, and further increase market liquidity for the benefits of the investment community.
Susan Oranye, executive secretary of PenOp said the association recently performed the closing gong ceremony at the floor of the Nigerian Stock Exchange (NSE) on the invitation of the management of the bourse.
Oranye said the two organizations that are among the strongest players in the Nigerian financial sector met to discuss partnership opportunities and ways in which the capital market can be developed especially in light of the Multi Fund Structure that was recently kicked-off by the pensions industry.
She said the meeting was attended by members of PenOp’s Executive Committee led by the President, Ronke Adedeji and members of the NSE’s Senior Management Team led by Tinu Awe, executive director, Regulations.
Multi-Fund Structure, a fall out of the new amended investment guidelines of the pension industry brings flexibility in the investment and risk appetite of contributors and retirees based on their age and preference, under the Contributory Pension Scheme(CPS),and has became effective since 1st July 2018.
The new investment structure targets to transform the country’s pension industry and bring enhanced returns to contributors and retirees based on their risk appetite.
“Fund I is targeted at people of 49 years and below who want higher returns, and are willing to take higher risks. Membership into this fund is strictly based on request. Fund 2 is aimed at people who are aged 49 years and below and still working but are satisfied with moderate returns and levels of risks. Fund 3 targets people 50 years and above but still working and have very low risk appetite. While Fund 4 are retirees who have the lowest risk profile of all categories.”
According to experts, multi-fund will create stability in the market, as a lot of funds will come from the PFAs, which will help absorb the market of shock from mobile foreign funds.
“We have seen in the past where the prices of stocks crashed because foreign equity investors pulled out their funds. Multi-fund will help to bring stability in the market against this kind of development, experts said.
As at May 2018, the total pension fund assets under management has hit N8.14 trillion, PenCom stated in its monthly reports which detailed the summary of pension fund assets as at May 31, 2018.
According to the pension regulator, Retirement Saving Account (RSA) retiree fund stood at N619.59 billion; RSA active fund, N5.51 trillion; Closed Pension Funds N1.08 trillion and Approved Existing Schemes (AES) N9.26.85 billion.
PenCom posited that 70.08 per cent of the N8.14 trillion pension assetswere invested in Federal Government’s securities, which amounted to N5.71 trillion.
A breakdown of the investment according to the commission, revealed that FGN bonds got N3.96 trillion; treasury bills, N1.68 trillion; agency bond ( NMRC & FMBN) N6.54 billion; Sukuk bonds, N51.98 billion and green bonds, N8.26 billion.
PenCom maintained that state government securities gulped N154.02 billion; corporate bonds, N393.27 billion; corporate infrastructure bonds, N8.36 billion; banks, N662.80 billion; commercial papers, N71.75 billion and estate properties, N228.86 billion.
Other classes of assets include, supra-national bonds, N8.21 billion; open/close end funds, N10.16 billion; mutual funds, N1987 billion; private equity fund N3727 billion; infrastructure fund, N8.95 billion and cash & other assets N96.13 billion.
According to the Pension Reform Act (PRA) 2014, the minimum rate of pension contribution is 18 percent of monthly emoluments, where 8 percent is to be contributed by employees and 10 percent by employers. However, an employer may choose to bear the full responsibility of the scheme provided that in such a case, the employer’s contribution shall not be less than 18 percent of the employee’s monthly emoluments.
The key objectives of the Contributory Pension Scheme are to ensure that every person who has worked in either the public or private sector receives his retirement benefits as and when due; assist improvident individuals by ensuring that they save to cater for their livelihood during old age; establish a uniform set of rules and regulations for the administration and payment of retirement benefits in both the public and private sectors; and stem the growth of outstanding pension liabilities.
CPS is contributory, fully funded, based on individual accounts that are privately managed by Pension Fund Administrators with the pension funds assets held by Pension Fund Custodians.