The Pension Fund Administrators (PFAs) invested N693bn funds under the Contributory Pension Scheme in banks in nine months, according to data from the National Pension Commission (PenCom).
PenCom’s unaudited report on pension funds industry portfolio for the period ended September 30, 2021 revealed that the PFAs’ investment in banks rose from N1.53tn as of the end of December 2020 to N2.22tn in September 2021.
Total funds under the CPS have exceeded N13tn, according to the commission.
The commission had, in its amended investment regulation, highlighted the requirements for investing the funds in line with the provisions of Pension Reform Act, 2014.
It said the purpose of the regulation was to provide uniform rules and standards for the investment of pension fund assets.
According to the regulation, pension fund custodians must only take written instructions from licensed PFAs with respect to the PFAs’ investment and management of pension fund assets held in the custody of the PFCs on behalf of the contributors.
It said the PFCs, in discharging their contractual functions to PFAs, must not contract out the custody of pension fund assets to third parties, except for allowable investments made outside Nigeria.
“The PFC shall obtain prior approval from the commission before engaging a global custodian for such allowable foreign investments,” it said.
According to the regulation, the PFAs, in discharging their contractual functions to contributors, must not contract out the investment/management of pension fund assets to third parties except for open/close-end/hybrid funds and specialist investment funds allowed by the regulation.
PenCom stated that the PFAs must maintain a multi-fund structure as provided in the regulation to govern the investment of pension fund assets of RSA funds.
It said: “In addition to the requirements of other guidelines issued by the commission on corporate governance, ethics and business practices, each PFA shall establish an investment strategy committee as well as a risk management committee, in compliance with section 78 of the Pension Reform Act, 2014.
“The investment strategy committee, in addition to other functions specified in the Act, shall formulate internal investment strategies to enable compliance with this regulation, taking into cognisance the macro-economic environment as well as the investment objectives and risk profile of the respective PFA Funds.”
It also said the internal investment strategies must be approved by the PFA in a formal board meeting at least once every year or as frequently as changes occur in the macroeconomic environment that may affect pension fund assets.
The commission said the operators had invested a substantial part of the pension funds in the Federal Government’s bonds, treasury bills and state government securities.
The PenCom report stated that some of the money was invested in agency bonds, supra-national bonds, commercial papers, foreign money market securities, and open/close-end funds.
Other investment portfolios where the operators invested the funds are real estate investment trusts, private equity funds, infrastructure funds, cash and other assets.