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Multi Fund Structure

Multi Fund Structure

Introduction
The National Pension Commission (PenCom) recently published/released the Amended Regulation on Investment of Pension Fund Assets for the Pension Industry precisely in April 2017. The new investment guideline introduces a multi-fund structure, which would replace the one fund structure that puts all active contributors into one Retirement Savings Account (“RSA”) Fund without consideration for age or risk profile of such contributors.
What is the multi-fund structure?
The Multi-Fund structure is a framework that contains four funds class. The current RSA Fund will be sub-divided into three separate Funds, while the RSA Retirees Fund would be the 4th Fund. RSA holders are assigned to groups based on their age and risk profile.
Are their differences between the 4 Funds?
Yes. The respective funds differ based on their overall exposure to variable income instruments such as equities (that is, Ordinary Shares) and the age profile of the members.
Fund Type   Exposure to Variable Investment Instruments Membership
Fund I  20% to 75% of Portfolio Strictly based on request but not accessible to Retiree and active contributors of 50 years and above.
Fund II 10% to 55% of Portfolio Default for active contributors of 49 years and below
Fund III    5% to 20% of Portfolio  Default for active contributors of 50 years and above
Fund IV 0% to 10% of Portfolio  Strictly for Retirees
What are variable income instruments?
Variable income instruments is defined as the sum of a PFA’s investments in Ordinary Shares and participation units of Open Close-ended and Hybrid Funds; Real Estate Investment Trust; Infrastructure Funds; and Private Equity Funds comprising its current holdings and any future financial commitments to the acquisition of participation units in these Funds. These categories of investments have potentials to generate high returns over the long term but could be risky owing to uncertainty and fluctuations in market prices and returns.
Why should age and risk profile determine how my pension funds should be invested?
There is what is called “Risk Tolerance”. Everyone has a limit to the amount of risk that they can take and the amount of uncertainty they can handle. Typically, younger people tend to have more capacity for risk because they still have time to recover from loses (if any). Once a person is nearing retirement, it is advisable that they limit the amount of risks they take and reduce exposure to uncertainty as they would start drawing down on their pensions within a short period.
Consequently, the allowable exposures to variable income instruments have been designed such that Fund I has the highest allowable limit, followed by Fund II, III and IV respectively. This reduces the risk and uncertainty of contributors in line with their ages.
Can I decide which Fund Type to be assigned to?
Yes. On the day of commencement, Multi-fund Structure, contributors are allowed to choose the Type of Fund in which they desire to be. However, the following rules shall apply:
i. An active Contributor in Fund II who wishes to be assigned to Fund I shall make a formal request to the PFA.
ii. An active Contributor in Fund III who wishes to be assigned to Fund II shall make a formal request to the PFA.
iii. An RSA Retiree or active Contributor who is 50 years and above shall not be allowed to choose Fund I.
However, a default mechanism shall first apply. According to the default mechanism, all active contributors that are 49 years and below would be placed in Fund II while active contributors that are 50 years and above would be placed in Fund III and Membership of Fund I shall strictly be by formal request by a Contributor.
How often can I move between Fund types?
An active contributor may switch from one Fund type to another Fund type within a PFA, once in 12 months without paying any fees (subject to a formal application). Any additional requests for switches among Funds within a 12 month period by the active Contributor shall attract a fee, of an amount not less than a minimum value, to be determined by PenCom from time to time.
Are there any benefits in this multi-fund structure?
Yes. The new structure allows RSA holders more control over how their pension funds are invested based on their risk tolerance. For instance, an RSA holder in Fund III owing to the default classification based on age may have more tolerance for risks and uncertainty and could opt to be assigned to Fund II.
Can I request for my choice fund class immediately?
No, PenCom is yet to provide the operational framework to guide the transition to the Multi-Fund structure. Once the framework is released, there will be proper guidance regarding when contributors can be assigned based on the default age classification. Contributors will subsequently have the option to be assigned to a Fund of their choice depending on their risk tolerance.
What are the impacts on my pension balance when my PFA moves into the multi-fund structure?
None. The balance in your RSA will not change due to the movement to the multi-fund structure because the entire balance would be moved to the appropriate fund without charges.
What is/are the requirement(s) for switching from one fund type to another?
A formal request must be submitted by the contributor to his or her PFA.
Will the RSA and VC funds have separate fund price or the same?
The RSA and VC will have the same fund price because they will be invested in the same fund the contributor selects.
What impacts does Multi-Fund structure have on my future pension assets at the point of retirement?
The Multi-Fund structure provides more alignment between your retirement goals, risk appetite and age. Consequently, there will be a better chance for your pension assets to meet your expectations when you retire.
With the new multi-fund structure, can I be given the option to choose which specific variable income instruments my funds can be invested in?
No, the regulation only allows contributors to select a Fund, but the PFAs would continue to have the responsibility of selecting the specific instruments that the Funds would be invested in.
New Guide Line on Voluntary Contributions Withdrawal

New Guide Line on Voluntary Contributions Withdrawal

SUBJECT:       WITHDRAWALS FROM VOLUNTARY CONTRIBUTIONS

1.0 Section 4 (3) of the Pension Reform Act, 2014 allows active employees under the Contributory Pension Scheme (CPS) to contribute voluntarily in addition to the mandatory contributions into their respective Retirement Savings Account (RSA) in order to augment their  pension at retirement. Similarly, Section 4 (7) allows exempted employees from CPS to participate in voluntarily in the CPS subject to a Guideline issued by the Commission.

2.0   Section 10 of the Money Laundering Act 2011 provided for obligation on all the Financial Institutions to report any single transaction of 1115  million and above to the Economic and Financial Crime Commission (EFCC).

3.0  The Commission has observed the current high trend of requests for Voluntary Contributions (VC) withdrawals by PFAs especially the significant VC amount withdrawn, usually within short duration of lodgement in the RSA both for mandatory and exempted contributors  thereby defeating the purpose of VC which is meant to enhance pension at retirement.  Also the short intervals between the date of contributions and withdrawals, results in insignificant tax payable to the relevant tax and withdrawals, results in insignificant tax payable to the relevant tax authorities.

4.0  Consequently, this Circular is to provide measures that would curb high VC withdrawal, ensure appropriate tax payments and strengthen the process of VC administration in line with the draft Guidelines on Voluntary Contribution to be issued by the Commission.

5.0  The following rules and activities must be adopted by all PFAs /PFCs to foster compliance of clause 4.0 above:a)    Timeframe for withdrawal from VC account shall be once every 2 years from the last approved withdrawal date. Subsequent withdrawals shall only be on the incremental contributions from the date of last withdrawal.
b)     For mandatory contributors, the amount remitted as VC shall be separated as follow:
i)      50% shall be treated as contingent, available for withdrawal within the stipulated timeframe of every 2 years. Taxes would be deducted  on  income earned in line with Section 10 (4) of the PRA 2014.
ii)     The balance of 50% shall be fixed for pension and utilized at date of retirement to augment the contributor’s retirement benefit
c)     For exempted/foreign contributors, the following shall apply:
i)      The timeframe of withdrawal of once every two years in clause 5 (a) above shall be adopted.
ii)    The contributor is allowed to withdraw all the funds in his/her VC account after two years of contribution, subject to  deduction  of  taxes on  both  income  earned  and principal amount when withdrawal is less than five years of the contribution.
d)   PFAs shall forward request for approval to the Commission using the revised schedule for VC withdrawals hereby attached as Appendix  A.
e)    Both PFAs and PFCs are required to inform the Economic and Financial Crime Commission of any single lodgement of WS Million and above.6.0  Henceforth, all tax  deductions  shall  be  remitted to  the  relevant  Tax Authorities within 21 days after the end of the month of deduction and render returns to the Commission twice yearly of such remittance.7.0       Failure by any PFA to adhere to this Circular will result in the imposition of appropriate sanctions.

8.0      This Circular will be effective on 1 December, 2017.

Micro Pensions Scheme

Micro Pensions Scheme


The Pension Reform Act (PRA) 2014 expanded coverage of the Contributory Pension Scheme (CPS) to employees of organizations with less than three employees as well as the self-employed persons.
These categories of persons, mainly in the informal sector, constitute the vast majority of the working population in Nigeria and are not covered by any retirement benefit scheme. Accordingly, the National Pension Commission (PenCom) considers it necessary to develop the Guidelines and Framework that will enable these categories of persons save towards their retirement through a “Micro Pension Scheme”. In addition, due to their widely dispersed nature and generally low and irregular incomes, there is a need to provide a pension plan that would meet their special characteristics.
To this end, the Micro Pension Scheme initiative was conceived to bring this class of workers on board the retirement benefit scheme.
The Micro Pension Scheme would cater for the informal sector which has been segmented into three broad categories namely; (1) the low income earners (Artisans, Mechanics, Tailors, Market Men/Women, and Hairdressers etc.), (2) the high income earners (professionals – Accountants, Architects Engineers, Medical Doctors, Pilots, Lawyers and Consultants etc.) and (3) the Micro, Small and Medium scale enterprises.
Veritas Glanvills Pensions is here to partner with and provide all the necessary supports to persons in these categories towards ensuring their smooth entry into the Micro Pension Scheme (#PensionForAll).
For further enquiries kindly contact our Micro Pension Team on the following numbers: 0818-6837-545, 0706-4974-880, 0805-9994-038 or email: enquiries@vgpensions.com.

Pension Form

RSA Registration Form
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I hereby request that Veritas Glanvills Pensions register me as a Retirement Savings Account holder.