The National PENSION Commission (PENCOM) recently released the Amended Regulation on Investment of Pension Fund Asset for the Pension INDUSTRY. The new guideline introduces a multi-fund structure which replaces the existing single fund structure that puts/categorises all contributors into a Retirement Savings Account (RSA) without consideration for age or risk profile of such contributors.
What is the Multi-Fund Structure?
The Multi-Fund structure is a framework that aims to align the age and risk profile of RSA holders by dividing the RSA Fund into three fund types and retaining the Retiree fund. The various fund types are:
FUND I: Contributors must write formally to opt for this fund
FUND II: This is the default fund for active contributors aged 49years and below
FUND III: This is the default fund for active contributors aged 50years and above
FUND IV: This is the retiree fund
Features of the various Funds
The four funds differ according to their overall exposure to variable income instruments as follows:
| FUND TYPE | MAXIMUM EXPOSURE | MINIMUM EXPOSURE |
| FUND 1 | 75% | 20% |
| FUND 11 | 55% | 10% |
| FUND 111 | 20% | 5% |
| FUND IV | 10% | 0% |
What are Variable Income Instruments?
Variable income instruments are investments that generate returns that cannot be pre-determined from the date the investments were made. The prices of these investments fluctuate daily. Instruments in this category include Ordinary shares, Collective Investment Schemes (CIS) such as Mutual Funds, Private Equity Funds, Infrastructure funds, Real Estate Investment Trust.
When will this new guideline take effect?
The guideline took effect on 2nd July 2018
Can I decide which Fund type to be assigned to?
On the commencement date, the default mechanism will apply. All active members that are 49 years and below will be placed in Fund II and active contributors above 50 years would be placed in Fund III. However, subsequently active contributors can apply to switch between funds. An active contributor can switch from Fund II to Fund I while an active contributor in Fund III can switch to Fund II. All retirees and active contributors above 50years cannot switch to Fund I.
What are the requirements for switching from one fund type to another?
To switch from one fund to another, the contributor must submit a formal request to his PFA
What additional information do I need to know on the switch?
Contributors are allowed to switch between funds for free once within 12months. Subsequent movements will be at a fee to be determined by PENCOM
When will the 12months start counting?
PENCOM will provide clearer guideline on this at commencement.
If my date of birth is wrongly captured which Fund type will my PFA profile me?
Kindly check and update your records before the commencement of the new structure
How will the Fund Prices under the Multi-Fund Structure be determined at the point of crossing over?
PENCOM will provide further guidance on this at the commencement of the multi-fund structure. However at commencement your total RSA balance and units will be moved to the default fund without charges.
What impact does Multi-Fund structure have on my future pension assets at the point of retirement?
The multi-fund structure provides more alignment between your retirement goals, risk appetite and age. Consequently there will be a better chance for your pension assets to meet your expectations when you retire.
What are the impacts on my pension balance when my PFA moves into multi-fund structure?
The balance in your RSA will not change due to the movement to the multi-fund structure because your entire balance will be moved, hence at inception your balance remains intact. However subsequent growth in your balance will depend on your contributions, voluntary contributions as well as the returns generated by your PFA.
Will I have access to information of the funds?
The fund prices on all funds will be published daily on the websites of the PFAs and the annual financial reports of the RSA Funds of all PFAs are published in at least 2 national dailies.
What are the multi-fund options for Approved Existing Schemes?
Approved Existing schemes are governed by the Board of Trustees (BOT) who have the right to structure the portfolio in the best interest of beneficiaries subject to PENCOM approval. Consequently the Board of Trustees of contributory Already Existing Scheme (AES)can amend their agreements and restructure them along the lines of the Multi-Fund structure if they choose to.
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