N525bn PFA investment in shares worries contributors

The disclosure by, the National Pensions Commission (PenCom) that N525.5bn of the total pension assets has, so far, been invested in the stock market has put present and potential contributors on the edge, MESHACK IDEHEN reports

Many pension contributors targeting stress free retirement said the recent disclosure that N525.5billion of their funds has been invested in shares comes as a rude shock, considering that many of them would have wanted their money invested in less volatile instruments. In figures made available recently, the National Pension Commission said the N525.5billion represents only about 15 per cent of the entire pension funds, which was put at over N4.5tn at the end of June.

According to the pension industry regulators, N480.2billion out of the amount, which is about 14 per cent of the pension assets, was invested in domestic ordinary shares; while only one per cent was invested in foreign ordinary shares.

With that action by PenCom, industry observers said the arguments as to whether the commission through the pension fund administrators (PFAs), have the authority to invest contributors money without their consent will resurface, and that the contributory pension scheme would be subjected to crisis.

Moreso, some retirement savings account holders who spoke with our correspondent, said the experience of a few years ago, where stock market investors lost billions of naira should have been enough to warn the regulators and operators that the stock market remains the last place where retirees would want to have their funds placed.

An employee of a pharmaceutical firm based in Lagos, Mrs Rhoda Aliu told National Mirror that she, like most contributors are not happy with the move, saying the uproar over PFAs investment of contributor’s funds in infrastructure has barely died down.

According to her, “RSA contributors should have greater say in how their money is being invested. I will personally not invest my retirement contributions in shares if i have my way, because what happened in the not too distant past is still fresh on my mind”.

Speaking in the same vein, another RSA contributor from the Cooperatives Society of the Nigeria Union of Petroleum and Natural Gas Workers, NUPENG, Mr. Adamson Momoh, said since the inauguration of the CPS in 2004, the amount contributed by workers has continued to increase and that the PFAs will continue to invest the funds in different approved portfolios that suits their fancy.

According to him, “This cooperative would have since taken action against their PFA, were it not for the information that the largest portion of N1.47tn, which is about 42 per cent of the assets, was invested in the FGN bond; while N593.5bn or 17 per cent was invested in treasury bills”. Adamson said no matter what happens, that the FGN bonds were safe to invest in, adding the money invested on their behalf in Treasury bill could also be assumed safe.

However, he argued that PFAs investments of N408.5bn, N193.18bn, N169.7bn and N77bn in local money market securities, real estate properties, state government securities and corporate debt securities representing about 12 per cent, five per cent, five per cent and two per cent, respectively were all risky business that the operators should have taken time to explain to their contributors.

On his part, Chief Executive Officer of Riskgaurd Pension and Insurance Consultant, Mr. Yemi Soladoye, said the initial investment guideline introduced when the CPS started was narrow as it did not take care of certain relevant issues.

Soladoye said it was that narrow investment guideline that was now changing, as operators were now seeing the need to consider not only the safety of the funds but the yield and diversification of their investment.

According to him, “Pension funds are long term funds people contribute for years. Such funds are usually directed to projects of national development, especially the provision of infrastructure, but the original investment guideline was quite narrow and too restrictive to look at such areas”.

Reassuring contributors that their money was safe, and that the stock market was the right place to invest Chairman of Pension Fund Operators Association of Nigeria, (PenOp) Mr. Dave Uduanu, said the pension assets were safe and are effectively managed by the PFAs.

Udaunu said the growing funds of the PFAs are not left idle, adding that there are regulatory guidelines to monitor the investment of the money contributed by potential retirees. According to him, the PFAs were allowed to invest the funds in any safe quality instrument found available,poining out that PFAs do investment in equities; do bonds; and are allowed to do private equities, infrastructure assets and real estates.

The PenOp chairman noted also that PFAs were not investment banks or charity institutions, but were buyers of securities and investment instruments, which meant that they must be prudent with their investment, saying PFAs only considered investments that could yield returns so that when the pensioners retired, they could always get their money with ease.

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