PFAs make N140bn profit from pension fund investment

PFAs make N140bn profit from pension fund investment
Nike Popoola

Pension Fund Administrators made a profit of N140.19 billion from trading with funds in the Retirement Savings Accounts of contributors under the Contributory Pension Scheme in the last two years.

The amount was obtained by our correspondent from the National Pension Commission.

According to PenCom’s latest annual financial figures, the PFAs made returns of N53.42bn and N86.77billion in 2010 and 2011, respectively.

A breakdown of the figures showed that interest from investment income was N50.8bn in 2010 and N83.4billion in 2011, while dividends were N2.62billion and N3.37bn, respectively.

The statement of result read in part, "Interest/coupons received during the year was N83.40bn in 2011, which was 60 per cent higher than the N50.8bn received in 2010.

"This resulted primarily from the relatively higher yields on fixed income securities, especially FGN securities. The dividends received on investment in ordinary shares amounted to N3.37billion in 2011, while dividends received in 2010 were N2.62billion."

Out of the profit made from trading with the funds, PenCom said N43.92bn was transferred to the RSA retiree fund in 2011, which was higher than the N33.91billion paid as benefits in 2010 due to increase in the number of retirees by about 55 per cent.

The commission further said that although some funds recorded modest gains from the sale of equities and bonds in 2011, the net realised losses of N1.80bn incurred by a few large-sized PFAs that restructured their portfolios offset the positive gains made.

In continuation of its objective of instituting a dynamic regulation on investment of pension fund assets, which culminated in the introduction of new asset classes in December 2010, namely infrastructure bond, private equity and supranational bonds, the commission said it carried out a further amendment of the investment regulation and introduced a multi-fund structure for pension investment.

Equally, PenCom said it had partnered with relevant stakeholders to support the development of the corporate bond market and promote the development of alternative assets in the Nigerian capital market.

Due to the changing dynamics of the financial environment, PenCom had in December 2012 reviewed the investment guidelines for the growing pension fund to safeguard it.

With the accumulation of N3.02tn worth of assets under the CPS as of the end of October 2012, the guideline review is to guide the PFAs and Pension Fund Custodians on the management of pension funds in their custody.

Major highlights of the guidelines are the consent for pension operators to invest the assets in Exchange Traded Funds; introduction of guidelines for global depository receipt, notes and Eurobonds; and maximum restriction of transactions done by PFAs with related parties such as stockbrokers to 30 per cent.

According to PenCom, the new multi-fund structure will be incorporated into the amended regulation in the first quarter of 2013.

The PFCs are mandated to only take instructions from the PFAs on the investment and must not contract out the custody of pension fund assets to third parties, except for allowable investments made outside Nigeria.

Source: Punch