MULTI-FUND STRUCTURE: FREQUENTLY ASKED QUESTIONS
The National Pension Commission (“PenCom”) recently published/released the Amended Regulation on Investment of Pension Fund Assets for the Pension Industry. The new investment guideline introduces a multi-fund structure, which would replace the “one size fits all” structure that puts all active contributors into one Retirement Savings Account (“RSA”) Fund without consideration for age or risk profile of such contributors.
The multi-fund structure is a new system of fund management that allows the splitting of the RSA ‘Active’ fund into 3 different funds; Fund 1, Fund 2 and Fund 3. The ‘Retiree’ fund remains and its called Fund 4.
Highlights of the various fund categories are as follows:
- Members of Fund 1 are 49 years and below.
- Existing contributors within the age bracket of 49 years and below shall have the option to move to Fund 1
- Such existing contributors shall buy into the fund at a nominal unit price of N1.00 on the 1st day of effective implementation of the Multi-fund structure.
- New entrants subsequent to take off date shall buy into the fund at the prevailing value of accounting unit of Fund 1
- Members of Fund I (49 years and below) shall not be allowed to move to Fund III.
- This shall be the current RSA ‘Active’ fund and shall be known as ‘Fund II’.
- This will be the default fund for contributors that are within the age bracket of 49 years and below.
- Fund II shall continue to maintain the value of an accounting unit (VAU) of the RSA ‘Active’ fund based on NAV.
- Members of Fund II (49 years and below) shall not be allowed to move to Fund III, but shall only be allowed to move to Fund I
- Members of Fund III are 50 years and above.
- This will be the default fund for contributors that are within the age bracket of 50 years and above.
- Initial entrants into Fund III shall buy into the fund at a nominal unit price of N1.00 on the 1st day of effective implementation of the Multi-fund structure.
- New entrants, subsequent to take off date, shall buy into the fund at the prevailing Value of accounting Unit of the Fund.
- Members of Fund III (50 years and above) shall not be allowed to move to Fund I.
- This shall be the current Retiree fund and shall be known as ‘Fund IV.
- Members of Fund IV are not allowed to move out of the Fund.
- Active Contributors (members of fund I, II, III) are not eligible to buy into Fund IV.
FREQUENTLY ASKED QUESTIONS
Q: What is the effect of movement to a new fund on my Voluntary Contribution?
A: Your RSA PIN accommodates both your Pension contribution and your voluntary contribution, so both will be transferred to your preferred choice of fund and managed in line with the provisions of the circular for voluntary contribution.
Q: When I am in Fund I and then clock 50 years, will I be asked to move to Fund II by choice or Fund III by reason of age?
A: No, you will be moved by default of age to fund III, but you have the option to move to fund II thereafter.
Q: Is there any restriction/charge to my movement between funds?
A: You are allowed to move once in a year without any charge but an additional movement in the same year shall attract a fee to be determined by the Commission.
Q: As a retiree, can I move to other funds?
A: No, as a retiree you are not allowed to move out of Fund 4.
Q: Is there any documentation required for movement between one Fund to another?
A: For now you will only be required to make your choice of movement in writing. However, further information on requirements would be communicated as the need arises
Q: Do I have the option of selecting the instruments my funds can be invested in?
A: No, PFAs are the Fund managers and are expected to invest your funds in instruments that will yield good returns.
Q: When is the commencement date for this multi-fund structure?
A: 1st of January 2018.
Q: Is it possible for an RSA holder to split his/her fund to 2 different funds?
A: No, this is not possible because you are only identified with one PIN and cannot be allowed to have contributions in more than one fund structure at the same time.
Q: What are the benefits in the Multi-Fund structure?
- Increased safety of pension fund investment by diversification of pension fund portfolios.
- Increased investment in Alternative assets.
- Provide greater choice and control to contributors.
- Increased returns on Investment depending on the Contributor’s risk appetite.
Q: What is the relationship between the transfer window and the multi-fundstructure?
A: There is no relationship between the transfer window and the multi-fund structure. The transfer window allows the customer the choice of moving his/her RSA from one PFA to another while the multi fund allows a customer the choice of moving from one fund to another within the same PFA.
Q: Why the emphasis on variable assets?
A: Variable Assets have greater risk potential and consequently higher returns translating to greater growth of your funds. These variable assets are Ordinary shares, Mutual Funds, Exchange traded funds and REITs.
Q: Will the movement of Funds affect my account balance?
A: No. The balance in your account will not be affected. However, your unit price will change depending on the fund. Funds I and III will have an opening unit price of N1.00.