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PFAs invest N172.4bn in state securities

By on April 20, 2015

A total of N172.4bn was invested in state securities under the Contributory Pension Scheme in the 2014 financial period.

Figures obtained from the National Pension Commission on Friday, which confirmed this, also showed that the total assets under the CPS stood at N4.6tn at the end of 2014.

The commission had said the pension funds could only be invested in the bonds of state governments that were in compliance with the CPS.

At the end of the 2014 financial year, the commission noted that about 24 states had adopted the CPS, while 12 others were at various stages of implementing the scheme and one state yet to commence the process.

Lagos State, which was the first to drop the old pension scheme for the CPS, has already commenced the process of amending its Pension Reform Law 2007 following the amendment of the National Pension Reform Act.

PenCom introduced some guidelines for the Pension Fund Administrators for the registration of state and local government employees to enable them to adopt suitable structure for the implementation of the CPS.

One of the objectives of the guidelines was to ensure complete coverage of the states within a short time.

In the guidelines, the law gave concession to state and local governments to implement the structured approach for the registration of their employees.

These levels of government are expected to select their preferred Pension Fund Administrators and allocate some Ministries, Departments and Agencies to each, while the employees are free to register with any of the selected PFAs.

The Chairman, Pension Funds Operators Association of Nigeria, Mr. Misbahu Yola, said there were certain safety criteria to be considered before the funds could be invested.

He said despite the lull in the economy and its visible challenges, the pension assets had remained safe and well protected.

The operators, he stressed, had not lost any money.

According to him, the operators have remained conservative with the investment of the funds because the market environment has not been stable.

This situation, Yola said, required the operators to be careful with any investment.

He said safety and liquidity were two major things the operators had to consider before going into any investment.

Yola said one fundamental thing about the investment guidelines for the increasing pension assets was the introduction of a multi-fund.

According to him, there is a proposal for at least four types of funds, which are aggressive, conservative, balance and retiree funds.

Yola said the proposal was to fix the investment funds with the age of the contributors.

He explained that the conservative fund would allow for investment in classes of business with very little risks and this would be suitable for contributors within the ages of 50 to 59 before their retirement.

The balance, he said, would be appropriate for 49 year-old contributors and below.

According to him, the aggressive fund is for young people and those who have about 20 to 30 years to retire. Such funds, he added, could be invested in more risky areas.