VG Pensions commences Shari’ah compliant RSA Fund VI

VG Pensions has commenced the administration of RSA Fund VI to meet the yearnings of its clients who prefer to have their retirement savings invested in ethical, non-interest-bearing instruments in accordance with Islamic Shari’ ah Principles.

The commencement of Fund VI (non-interest) would assist in expanding the coverage of the Contributory Pension Scheme (CPS) by attracting employees with reservations about investments in non-shariah compliant instruments and promoting financial inclusion within the Nigerian Financial System.

RSA Fund VI (Non-interest) – Frequently Asked Questions

• What is Fund VI?

The National Pension Commission’s investment regulation defines ‘Non-interest compliant instruments’ as “financial securities and specialist investment funds that comply with the provisions of Islamic Commercial Jurisprudence (Shari’ah) and any other established non-interest principles, as approved by the Financial Regulation Advisory Council of Experts (FRACE), or any other body, constituted by the Central Bank of Nigeria and/or Securities and Exchange Commission, from time to time”.

• Who can transfer to Fund VI?

1. 1. • RSA holders in Fund I, Fund II and Fund III are eligible to move their RSA contributions to Fund VI (Active Fund VI).
      • Retirees in Fund IV are eligible to move their RSA contributions to Fund VI (Retiree Fund VI).
      • New members to the Contributory Pension Scheme can also be admitted directly into the Active Fund VI.
      • The Commission shall determine the participation of Micro Pension Contributors in due course

• What is the process for transferring to Fund VI?

1. 1. • Eligible RSA holders seeking to move to Fund VI can do so in accordance with the existing Investment regulation dealing with active choices.
      • The provisions of the RSA Multi-fund Implementation Guidelines shall apply to Fund VI in respect of cost of transfer, valuation, movement of assets & types of assets, maintenance of proper books of accounts, custody arrangements and movements from RSA Funds I, II, III, and IV.
      • RSA holders in Fund VI seeking to move back to any of the Active RSA Funds or Fund IV shall do so in line with the provisions of the RSA Multi-fund Implementation Guidelines and the Investment Regulation dealing with Transfers between Fund Types within a PFA.
      • The nominal unit price of Fund VI (RSA Fund VI and Retiree Fund VI) shall be N1.000 at the 1st day of the effective implementation of Non-Interest Fund.
      • Kindly contact us at VG Pensions indicating that you wish to move to Fund VI and we will guide you through the process.

• What are the allowable investment instruments in Fund VI?

1. 1. • 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

• How will Fund VI be structured?

1. 1. • 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.

• Who holds Custody of Non-Interest Fund Assets?

PFAs shall maintain the Pension Fund Custodian (PFC) that manages the custody of the ‘Active’ RSA Funds (Fund I, II and III) to administer the custodial services of the ‘Active’ and Retiree RSA Fund VI. First Pension Nigeria Custodian Limited is VG Pensions’ custodian for Fund VI.

• Can a Non-Islamic customer move to Fund VI?

Fund VI is available to any Retirement Savings Account (RSA) holder interested in having his or her pension savings invested in ethical and non-interest financial instruments. In other words, the fund is open to Muslims and non-Muslims alike.

• 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.)

• Is the Monthly payment structure different from the regular structure?

Monthly payment for Retirees in Non-Interest Fund VI is the same as that of the regular Fund IV. Your monthly pension will continue uninterrupted.

• If the fund is non-Interest, does this mean my pensions contributions will not appreciate?

The term non-Interest does not mean zero return on investment. All businesses/ventures are designed for profit. Under this Fund VI, profit or loss on investment is shared.

• What is the difference between Fund VI and Funds I-V?

The major difference is that Fund VI pension assets are invested in instruments that are non-interest bearing and are in accordance with Islamic Shari’ ah Principles while Funds I-IV pension funds are invested in both interest and non-interest-bearing assets and are not guided by Islamic Shari’ ah Principles.

• 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.

• What would the initial portfolio composition of Fund VI look like?

By the guidelines issued by the Commission, the portfolio composition of Fund VI shall be made up of Shari’ah compliant instruments. However, where there are no enough such instruments, the gap can be filled with conventional (non-compliant) securities/instruments.

But PFAs are required on a monthly and quarterly basis to provide PenCom with justifications for all non-Shari’ah complaint securities held in the Fund VI portfolio.

The non-compliant instruments in the Fund shall be progressively phased out in favor of Shari’ah compliant securities subject to market situation and availability of products.

• How will PenCom ensure that Shari’ ah compliance is attained?

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.

Additionally, the Financial Regulation Advisory Council of Experts, FRACE shall serve as an advisory body to PenCom on Islamic Finance matters and specifically on matters regarding the investment of Fund VI assets.

• 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, the fee shall be income-based. The rate of fees to be charged shall be as defined in the Regulation on fees structure and other relevant circulars issued by the Commission.

GETTING STARTED

To have your retirement savings invested in the RSA FUND VI, please click the button below to fill the multi-fund switch form or send an email to contactcenter@vgpensions.com.