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The Multi-fund Structure for RSA Funds otherwise known as the life-cycle investment structure was conceived by the Commission to align contributors’ risk appetite with their investment horizon, at each stage of their life cycle. The multi-fund structure comprises Fund I, Fund II, Fund III and Fund IV (Retirees Fund). The respective funds are distinguished by their overall exposure to variable income instruments and the age profile of the contributors.
The term variable-income instruments refer to investments that provide their owners with a rate of return that is dynamic and determined by market forces. Variable-income securities provide investors with both greater risks as well as rewards.
Exposure to variable income instruments in the context of the multi-fund structure is 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.
Multi-fund Structure Snapshot
|FUND I||FUND II||FUND III||FUND IV|
|Allocation to Variable Income||20%-75%||10%-55%||5%-20%||0%-10%|
Strictly on request but not accessible to Retiree and Active Contributors of 50 years and above
|Default for active Contributors of less than 50 years||Default for active Contributors of 50 years and above||Strictly for Retirees that opt for Programme withdrawal|
Effective from the date of implementation, PFA shall allocate contributors to the various fund type by default accordingly.
I. Membership of Fund I shall strictly be by the formal request by a Contributor.
II. Active Contributors who are less than 50 years as at their last birthdays shall be assigned to Fund II.
III. Active Contributors who are 50 years and above as at their last birthdays shall be assigned to Fund III.
IV. Fund IV shall strictly be for RSA retirees only.
For contributors choosing the funds in which they desire to be, the following shall apply:
I. An active Contributor in Fund II who wishes to be assigned to Fund I shall make a formal request to his/her PFA.
II. An active Contributor in Fund III who wishes to be assigned to Fund II shall make a formal request to his/her PFA.
III. An RSA Retiree or active Contributor who is 50 years and above shall not be allowed to choose Fund I.
IV. An active contributor in Fund II is not allowed to opt for Fund III.
V. Fund III is strictly for active contributors above 50 years.
Objectives of the Multi-Fund Structure
I. Achieve optimum returns for contributors by aligning their pension saving with their individual risk/return profile.
II. Provide investment portfolio choices to contributors.
III. Enhance the safety of pension assets through adequate portfolio diversification
Benefits of the Multi-Fund Structure
I. Provide greater choice and control to contributors on how their pension funds are invested.
II. Investment in financial instruments that provide a cash flow that matches the profile of the contributors.
III. Increased investment in Alternative assets which will essentially protect against inflation and help to facilitate improved returns over the long term.
IV. Provide for investment strategies that will better diversify risk and sustain returns
FREQUENTLY ASKED QUESTIONS ON MULTI-FUND STRUCTURE
Q: What are the benefits of the Multi-Fund structure to the Contributor?
Q: Can I decide which fund types I will like to be?
A: On the commencement date, the default mechanism will apply. All active members that are below 50 years will be placed in Fund II and active contributors above 50 years would be placed in Fund III. Subsequently active contributors can apply to switch between funds. An active contributor can switch from Fund II to Fund I while an active contributor in Fund III can switch to Fund II, but not Fund I. All retirees and active contributors above 50 years cannot switch to Fund I.
Q: How do I move from one fund to the other?
A: To switch from one fund to another, after the initial default placement into funds based on age, the contributor must submit a formal request to his/her PFA.
Q: What is the effect of movement to a new fund on my Voluntary Contribution?
A: For now, your Voluntary Contribution will remain invested within the same fund as your monthly regulatory contribution.
Q: What is the relationship between the transfer window and the multi-fund structure?
A: There is no relationship between the transfer window and the multi-fund structure. The transfer window allows the customer the choice of moving his/her RSA from one PFA to another while the multi fund allows a customer the choice of moving from one fund to another within the same PFA.
Q: Will the movement of Funds affect my account balance?
A: No. The balance in your account will not be affected. However, your unit price will change, if you fall within the category of those to be moved to Fund III, as your default i.e. based on your age. Funds I and III will have an opening unit price of N1.0000, on take-off date, while subsequent additions to the fund will be done at prevailing prices. The choice of Fund I is strictly by request and not for individuals above age 50.
Q: Is there additional cost to my switch from one fund to the other?
A: You may migrate from one Fund to another a maximum of twice in a calendar year. The first transfer in a calendar year shall be at no cost to you, while any subsequent transfer in the same calendar year shall be at a flat rate of ₦1,000.00.
Q: As a retiree, can I move to other funds?
A: No, as a retiree you are not allowed to move out of Fund 4.
Q: What has age and risk profile got to do with how my pension fund is managed?
A: To every investment return, there is a level of risk involved. Everyone has a limit to the amount of risk they are willing to take on their investment or the amount of uncertainty they can tolerate. Once a person is nearing retirement, it is advisable that they limit the amount of risks they take and reduce exposure to investments with relatively high volatility/risk, especially as they would start drawing down on their pensions within a short period.
Thus, allowable exposure to variable income instruments have been designed such that Fund I has the highest allowable limit with potentially higher returns and corresponding higher volatility/risk, followed by Fund II, III and IV respectively. This reduces the risk and uncertainty of contributors in line with their ages.
Q: What impacts does Multi-fund structure have on my future pension assets at the point of retirement?
A: The Multi-Fund structure provides more alignment between your retirement goals and risk appetite. It therefore offers a better chance for your pension assets to meet your expectations at retirement.
Q: What are the requirements for switching from one fund type to another?
A: To switch from one fund to another, the contributor must submit a formal request to his/her PFA. Please note that rules on age restrictions for each fund will apply.
Q: What are the likely impact on my pension balance when my PFA moves into the multi-fund structure?
A: 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, if required, without charges. However subsequent growths in your balance would depend on contributions such as the mandatory monthly contributions, voluntary contributions as well as returns generated by the PFA on that particular fund.
Q: How Often Can I move from one Fund to the other?
A: An active contributor may migrate from one Fund to another a maximum of twice in a calendar year (12 months)
Any additional requests for switches among Funds within a 12 month period by the active Contributor shall be at a flat rate of ₦1,000.00.
Q: How Will Premium Pension Limited Assist Me In Choosing The Right Fund?
A: Before the take-off date, we will continue to share necessary information via email, text, online (our website and social media handle) that will provide some basis for your decision – i.e. in the case where you want to make a different fund from your ‘default fund’. In the event you want to switch between funds, we will also continue to provide needed information that will guide you through the process of assessing risk and making an informed decision.
The new scheme covers you if you work for government or in a private organisation that has three or more employees.
To download an Account Opening form, click here
Complete the application form to open a Retirement Savings Account. Submit the form and a white background passport size photograph to our nearest branch office. A personal identification number (RSA PIN) will be issued to you as evidence of successful registration.
There is no merger of private sector pension with that of the public sector pension since the sources of funding are not the same.
However, both are now being regulated under the same rules and regulations.
An employee shall make monthly contributions of a minimum of 8% of his/her total monthly emoluments (i.e., monthly basic salary, transport allowance and housing allowance) into his RSA.
The employer shall contribute a minimum of 10% of the employee’s monthly emoluments towards the retirement benefits of the employee.
Contributions towards your pension are taken out of your salary by your employer every month. In addition to this, the employer makes a contribution towards the pension. The two contributions are jointly paid to the Pension Fund Custodian who puts the funds into an account which is held in your name with your Pension Fund Administrator (PFA).
The contributions made for you are kept in a Retirement Savings Account which is managed by your PFA. The PFA must issue a Statement of Account to you at least once every quarter or on demand. You will also receive transactional and quarterly balance SMS alerts so that you can watch and monitor your pension as it grows.
The RSA is similar to a bank account except that no contributor can withdraw money from the RSA before his/her retirement. The PFA is required to invest the money and issue statements of account at least once every quarter to the contributor or on demand.
Movement from one employment to another does not affect pension under the new scheme. The account (RSA PIN) remains yours for life. You just need to notify your PFA of the change, forward your RSA PIN and PFA details to your new employer to ensure that the pension contributions/deductions from the new employer will be sent to that account.
There is no qualifying period for pension. If an employee works for an employer for one month, his/her pension contribution will be paid by the employer into the employee’s Retirement Savings Account (RSA) for that month. If the employee moves on to work for another employer for another 1 year, the pension contribution will be paid by the second employer for that period of 1 year and it goes on and on like that.
You can have access to the RSA upon retirement at the age of 50 years or more. Similarly, if an employee retires before the age of 50 years due to mental or physical incapacity, he/she can access RSA immediately. Also, an employee who resigns or loses employment under the age of 50 years is entitled to withdraw 25% from the balance of his/her RSA if he/she stays for 4 months without securing another paid employment.
The balance of 75% of the RSA will be invested to generate additional income and the RSA holder will continue to receive statement showing the income being generated. Upon attaining the age of 50 years and if the balance in the RSA is above N500,000, the RSA holder will be placed on a monthly pension plan. But if the balance is N500,000 or less, the amount will be paid to the RSA holder en-bloc. In the event of death, the entire amount in the RSA will be paid to the holder’s nominated beneficiary.
No, there is no gratuity under this scheme. However the law provides for payment of Lump Sum benefit (minimum of 25% and maximum of 50%) to a retiree at retirement from the balance standing to the credit of his/her RSA. This benefit payment is made provided the balance after the withdrawal could purchase an annuity or fund monthly payments that would not be less than 50% of his/her monthly pay as at retirement.
However, an employer may choose to pay any other severance benefits (by whatever name called) over and above the retirement benefits payable to the employee subject to the terms and conditions of his/her employment.
Under Normal Retirement (50 years above) the customer is entitled to minimum of 25% and maximum of 50% of RSA balance as Lump sum payment and a monthly or quarterly programmed withdrawal.
Retiree above 50 years with 500,000 naira or below as RSA balance is paid off (enbloc payment).
Temporary loss of job and voluntary retirement before the age of 50 years is paid 25% of RSA balance 4 months after exit.
Death benefits is full payment of RSA balance to nominated Next of Kin, this also applies to group life insurance payment.
Where an employee/retiree who has been contributing under the new pension scheme dies, his/her retirement benefits shall be paid to his/her beneficiary under a WILL. In the event that the deceased did not leave a WILL, the retirement benefits shall be paid to any person appointed by the Probate Registry as the administrator of the estate of the deceased.
The total contributions will be paid out by the employer directly to a Pension Fund Custodian and will be managed and invested by the Pension Fund Administrator (PFA) of the employee’s choice.
You can increase your pension by making additional voluntary contribution over and above the 8% prescribed by PRA, 2014. Similarly, your employer may increase the employer’s pension contribution above the 10% minimum contribution prescribed by law.
The PFA or your employer cannot have access to the funds in your Retirement Savings Account (RSA). The account operates on your exclusive instruction.
The National Pension Commission is empowered by the Pension Reform Act 2014 to supervise and regulate the new pension scheme
WHAT ARE THE MAIN FUNCTIONS OF THE NATIONAL PENSION COMMISSION?
The National Pension Commission issues licenses to PFAs and Custodians, regulates their activities, and generally formulates, directs and oversees the overall policy guidelines on pension matters in Nigeria.
The pension funds and assets in the Retirement Savings Account (RSA) are kept by the PFC and as such the liquidation of the PFA will not affect the funds and assets. Besides, under the Pension Reform Act 2014, every PFA is expected to maintain a statutory reserve fund as contingency fund to meet claims for which it may be liable as may be determined by National Pension Commission.
HOW CAN I BE SURE THAT MY CONTRIBUTIONS ARE SAFE?
All those managing or keeping custody of pension funds and assets will be licensed and continually regulated and supervised by the National Pension Commission.
WILL INFLATION AND DEVALUATION OF THE NAIRA NOT ERODE THE VALUE OF THE PENSION CONTRIBUTIONS?
It is the duty of the PFAs to administer the contributions and invest in such a way that will ensure safe and reasonable returns on investment. The reserve fund created by the PFAs under the Act would compensate for any erosion of the value of the contributions.
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