1) What is Fund VI?
Fund VI refers to the Non-Interest Fund (based on Islamic Shari’ ah Principles) created to cater to the needs of RSA holders who would like their pensions managed in accordance with Islamic Shari’ ah Principles.
2) If the fund is Non-Interest, does this mean my pensions contributions will not appreciate in value?
The term Non-Interest does not mean zero return on investment. All businesses/ventures are designed for profit. In Non-Interest Investing, the means by which the profits are earned is even more important. Its earning philosophy focuses on profit or loss sharing; not the outright charge of interests as in conventional investing.
3) What is the difference between Fund VI and Funds I-V?
PenCom requires that PFAs invest Fund VI assets in instruments that are non-interest bearing and are in accordance with Islamic Shari’ ah Principles. Funds I-IV are invested in both interest and non-interest-bearing assets and are not guided by Islamic Shari’ ah Principles.
Specifically, Fund VI assets shall not be invested in the production or trading of alcohol, pornography, weaponry, gambling/betting, speculation, interest earning ventures and other ventures of similar nature that are contrary to Sharia principles.
4) How will Fund VI be structured?
- Fund VI would be separated into two (2) funds for Active RSA holders and Retirees.
- Active Fund VI (Active Non-Interest Fund): For contributors in Funds I-III that have elected to move their balances to Fund VI.
- Retiree Fund VI (Retiree Non-Interest Fund): For retired contributors in Fund IV that move their contributions to Retiree Fund VI and those that move their balances from Active Fund VI upon retirement.
- RSA contributors in Fund III can move their balances directly to Retiree Fund VI at the time of retirement.
5) Will the returns in the Fund VI be higher or lower than that of the regular Funds?
The rule of risk and return in conventional investing applies to Non-Interest investing. The return on investment is associated with the level of risk exposure. Research has shown that Non-Interest investing can in some cases provide better risk adjusted returns than conventional investing.
6) Who can transfer to Fund VI?
- RSA holders in Fund I, Fund II and Fund III are eligible to move their RSA balances to Fund VI (Active Fund VI).
- Retirees in Fund IV are eligible to move their RSA balances to Fund VI (Retiree Fund VI).
- New members to the Contributory Pension Scheme can also be admitted directly into the Active Fund VI
- The National Pension Commission (PenCom) shall determine the participation of Micro Pension Contributors (Fund V) in due course.
7) Can a Non-Islamic customer move to Fund VI?
Yes, Non-Interest investing offers a way of conducting financial transactions according to certain defined ethical values and parameters. It is for any Retirement Savings Account (RSA) holder interested in having their pension savings managed in an ethically conscious way which will benefit people, economy and environment (social good). The fund is open to muslims and non-muslims alike.
8) What is the process for transferring to Fund VI?
Eligible RSA holders seeking to move to Fund VI can do so in accordance with the existing regulation dealing with active choices. Kindly contact us at Sigma Pensions indicating that you wish to move to Fund VI and we will guide you through the process.
RSA holders in Fund VI seeking to move back to any of the Active RSA Funds or Fund IV can do so. Kindly contact us at Sigma Pensions to guide you through the process.
9) Is the Monthly payment structure different from the regular structure?
Monthly payment for Retirees in Non-Interest Fund VI is thesame as that in the regular Fund IV. Your monthly pension will continue uninterrupted. The transition is also seamless.
10) What are the allowable investment instruments in Fund VI?
- Government Sukuk (including Islamic T-bills and Euro Sukuk) issued by FGN, CBN or FGN agencies, as well as Infrastructure Sukuk backed by FGN/CBN guarantee.
- Corporate Sukuk (including Shari’ ah compliant ABS, MBS, GDNs, Euro Sukuk & Infrastructure Sukuk).
- Supranational Sukuk
- Shari’ ah compliant Money Market instruments
- Shari’ ah compliant Ordinary Shares (including GDRs)
- Shari’ ah compliant Infrastructure Funds
- Shari’ ah compliant Private Equity Funds
- Shari’ ah compliant Open/Closed/Hybrid Funds
- Shari’ ah compliant Real Estate Funds
11) Would any conventional (non-compliant) assets be included in Fund VI?
Fund VI assets are also allowed to be invested in conventional assets where a PFA is unable to find approved non-interest instruments. The conventional assets are to be phased out as more approved non-interest instruments become available.
The conventional securities to augment Sharia-compliant assets could be interest bearing but should not be in sectors/business whose underlying assets/products do not meet the basic ethical principles (i.e., assets shall not be invested in the production or trading of alcohol, pornography, weaponry, gambling/betting, speculation and other ventures of similar nature that are contrary to Sharia principles.)
12) What would the initial portfolio composition of Fund VI look like?
According to PenCom, the portfolio composition of Fund VI shall first and foremost be made up of Shari’ah compliant instruments and any gap can then be filled up with conventional (non-compliant) securities/instruments.
PFAs would on a monthly and quarterly basis be required to provide PenCom with justifications for all Non-Shari’ah complaint securities held in the Fund VI portfolio.
The Portfolio Mix (compliant vs non-compliant) in Fund VI shall be progressively phased out in favor of Shari’ah compliant securities subject to market situation and availability of products.
13) What are the asset allocation limits for Fund VI?
Active FUND VI
Retiree FUND VI
14) How will PenCom ensure that Shari’ ah compliance is attained?
The FRACE (Financial Regulation Advisory Council of Experts) shall serve as an advisory body to the PenCom on Islamic Finance matters and specifically on matters regarding the investment of Fund VI assets.
FRACE is an advisory body on Islamic Banking and Finance established by the Central Bank of Nigeria (CBN) to advice on matters relating to Islamic commercial jurisprudence for the effective regulation and supervision of Non-Interest Financial Institutions and products in Nigeria.
There shall be a Committee of Resident Shari’ ah Advisors established for the Pension Industry to ensure continuous Shari’ ah audit and purification of the Investment Pool of Fund VI assets. The Resident Shariah Advisors shall also be responsible for the purification and disposal of Non-Permissible Income, where investment was done in conventional non-Shariah-compliant instruments or any accrued income that is non-permissible under Shari’ ah.
15) Can Purification be done in Fund VI?
Purification has the literal meaning, “to cleanse”. Any income derived from non-compliant investment in Fund VI would be required to undergo purification – a form of obligatory charity.
There shall be a Committee of Resident Shari’ah Advisors established for the Pension Industry to ensure continuous Shari’ah audit and purification of the Investment Pool of Fund VI assets. The Resident Shariah Advisors shall also be responsible for the purification and disposal of Non-Permissible Income, where investment was done in conventional non-Shariah-compliant instruments or any accrued income that is non-permissible under Shari’ ah.
16) What are the applicable fees for Fund VI?
For Active Fund VI, management fees shall be charged as a percentage of the NAV (Net Asset Value) of the investment of Fund VI assets. While for the Retiree Fund VI, this fee shall be income-based.
Administration fees shall be charged per RSA holder by PFAs, to cover the cost of registration and administering each RSA in line with the provisions of the Regulation on Fees Structure issued by the Commission.
To invest in the RSA FUND VI, please click the button below to register or send an email to firstname.lastname@example.org.