News Column

PFAS Invest N2.3 Trillion Pension Funds in FG Securities

May 28, 2014

Sola Alabadan

A review of pension fund investment portfolio shows that the Pension Fund Administrators (PFAs) continued to invest bulk of pension funds in Federal Government securities at 63.39 per cent accounting for N2.3 trillion as at March 31, 2014, the National Pension Commission (PenCom) revealed. The total pension fund assets under the contributory pension scheme established by the Pension Reform Act 2004 stood at N4.2 trillion as at March 31, 2014.

The pension regulator also said the quantum of pension fund investment in money market securities stood at N355 billion as at the end of first quarter, representing about 8.4 per cent of the total pension funds assets.

As these indicate that more than 70 per cent of the total pension assets are invested in Federal Government Securities and Money Market Securities, it has been argued that over-concentration of pension funds in these debt instruments might be limiting the growth potential of the retirement fund for young pension contributors with long term investment horizon.

However, the Pension Fund Operators Association of Nigeria (PenOp) has denied the insinuation that the PFAs were investing majority of the pension funds in low yield debt instruments, saying that contrary to the thinking in some quarters, the Federal Government Securities are not low yield debt instruments as bonds are giving enough yields.

PenOp explained that the PFAs have continued to show preference for certain portfolio of investments because the pension operators were trying to ensure the safety of the pension assets under management.

Based on the figures released by PenCom, as at March 31, 2014, investment in State Government securities was N195 billion (4.6 per cent), while investments in Corporate Debt Securities N79 billion amounted to (1.9 per cent).

According to commission, investment in ordinary shares amounted to N601 billion representing 14.2 per cent, while private equity accounted for N9.3 billion (0.22 per cent), and real estate properties accounted for N228 billion (5.4 per cent).

A further review of pension fund investment portfolio shows that the Retirement Savings Account (RSA) active funds accounted for about N2.6 trillion of the total pension fund assets, while RSA retiree fund accounted for about N347 billion.

Similarly, the Closed Pension Fund Administrators (CPFAs) contributed about N642 billion and Approved Existing Scheme (AES) accounted for about N628 billion.

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Source: AllAfrica

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