Multi-fund structure ’ll give workers’ better investment returns – Expert

An Actuarial scientist and Chartered insurer, Dr Pius Apere, has said that the multi-fund structure that was introduced in the management of pension funds will give workers better returns.

He said this in a report on ‘Suitability of multi-fund structure as investment strategy for Contributory Pension Scheme with an Underpin (Guaranteed Minimum Pension) under the PRA 2014– from actuarial perspective.’

“The implementation of the multi-fund structure for Contributory Pension Scheme under PRA 2014 is expected to maximise the investment returns for Retirement Savings Account holders prior to retirement and this will in turn likely to increase their pension benefits at retirement,” he said.

He explained that Section 85 (1) of Pension Reform Act 2014 states that Pension Fund Administrators should invest pension fund assets with the objectives of ensuring safety and maintenance of fair returns on amount invested.

In other words, he added, that the CPS members were expected to receive pension benefits as and when due and also have sustainable standard of living in retirement.

According to him, the National Pension Commission’s regulation (on investment of pension fund assets) in February 2019 specified six investment fund types under the multi-fund structure with a given overall maximum percentage exposure to variable income instruments for each fund type.

He said the PFAs should allocate contributors to various fund types according to certain criteria.

Prior to the introduction of multi-fund structure in July 2018, he said the  PFAs operated low risk investment strategies, without taking into account the scheme members’ duration (age) / risk profiles and their freedom of choice of investment funds.

He said, “Furthermore, there had been an over-concentration of pension funds invested in debt instruments (e.g. government bonds) with limited growth potential for the retirement funds. The Contributory Pension Scheme also had only two investment funds to invest in, namely RSA active fund and RSA retiree fund, where all active contributors’ and retirees, funds were being invested in respectively.”

Over the long-term, he added that these low strategies were likely to result in lower emerging pensions than might have been expected of lifestyle investment strategies for investment portfolios with different risk profiles.