The Nigerian Pension fund industry recorded significant growth in 2021, in terms of net asset value, hitting a record high of N13 trillion in September 2021. However, the industry was only able to post an annual 6.42% return on investment
This is based on the fund price analysis of the 22 listed Pension Fund Administrators (PFAs), carried out by Nairametrics Research.
The industry has become more competitive since the official opening of the transfer window by the National Pension Commission (PenCom), which gives the opportunity for Retirement Savings Account (RSA) holders to switch from one Pension Fund Administrator (PFA) to another.
Since the transfer window was opened, 38,518 RSA holders have switched PFAs in a little less than one year. This has intensified the competition in the industry, as PFAs brace to outwit themselves by printing competitive returns in their respective fund categories.
Hence, Nairametrics present the best performing pension fund administrators (PFAs) based on their fund category for the year 2021. However, let’s first take a look at the industry investment portfolio and why it is only able to return single-digit gains, which could be easily eroded by a significantly high headline inflationary pressure.
Why the single returns
A look at where the contributors’ money is being invested shows that as of September 2021, 63.2% (N8.22 trillion) of the total net assets was invested in FGN securities, most of which were in bonds. This is quite a conservative move by Nigerian PFAs given the less risky nature of FGN securities to investors and the fact that its yields are usually in the single-digit region.
Furthermore, 17.6% of the PFA funds were invested into local money market instruments at N2.29 trillion, which includes bank placements and commercial papers. The Pension’s industry invested a sum of N116.84 billion in mutual funds as of September 2021, which represents a decline of 27.6% year-to-date.
The industry’s investment in the local stock market bourse increased marginally by N15 billion, representing a 1.7% uptick compared to N858.5 billion recorded as of December 2020 to stand at N873.5 billion.
However, the PFAs reduced their exposure in the stock market to 6.72% from 6.98% that was recorded as of the beginning of the year. On the other hand, the NGX Pension Index grew by 16.96% in the review year, beating the stock market’s single-digit returns.
The stock market as a whole did not perform any better, as the All-Share Index only grew by 6.2% in 2021, failing to capitalize on the 50% returns it recorded in the previous year.
RSA Fund I
The RSA Fund I is the riskiest of the funds under consideration. The fund is designed for active contributors who are 49 years of age and below, majorly for the sake of maximizing the returns on investment through diversifying 20% to 75% of the funds in income instruments.
Although contributors can shift from this fund to fund II or III once they attain 50 years of age.
Stanbic IBTC led the list with 11.93% returns, followed by APT Pension with a 10.99% ROI, while Crusader Pension recorded a 7.97% return in the year under review.
Third Position: Crusader Sterling Pensions
Annual return – 7.97%
Second Position: APT Pension Fund Managers Limited
Annual return – 10.99%
First Position: Stanbic IBTC Pension Managers Limited
Annual return – 11.93%
RSA Fund II
APT Pension bested others in this category with a 10.83% return on investment, followed by Sigma Pension with an ROI of 9.95%, while Veritas Glanvills Pension posted a return of 9.2%. Meanwhile, the fund category recorded an average return of 6.05%.
It is a default fund for contributors who are 49 years and below and active contributors can shift to fund I based on their risk appetite. It is worth noting that fund II with N5.67 trillion contributors fund accounted for the largest share of the total net assets in the pension industry as of September 2021.
Third Position: Veritas Glanvills Pensions
Annual return – 9.2%
Second Position: Sigma Pensions
Annual return – 9.95%
First Position: APT Pension Fund Managers
Annual return – 10.83%
RSA Fund III
With 6.93% ROI, the RSA Fund III category is the second best-performing category in 2021, besting Fund I and Fund II in the review period. Veritas Glanvills led the category with a 9.53% ROI, significantly higher than the industry average. Tangerine Pensions followed with 9.05% returns, while First Guarantee Pension recorded a 9.02% return.
The RSA Fund III is a conservative fund with only about 5% to 20% invested in variable income instruments. It is a fund for contributors who are 50 years and above. Although the contributors can shift to Fund II, upon request.
Third Position: First Guarantee Pension
Annual return – 9.02%
Second Position: Tangerine Pensions
Annual return – 9.05%
First Position: Veritas Glanvills Pensions
Annual return – 9.53%
RSA Fund IV
The RSA Fund IV printed an average return on investment of 7.41% in the period under review, representing the best-performing fund category. First Guarantee Pension led this category with 10.42% ROI, closely followed by Sigma Pensions with 10.19%, and Crusader Pensions with 9.86%.
This fund category is only open to retirees and investment conservatives. Contributors in this fund cannot move from this fund to any other fund. About 10% of the fund can be invested in variable income instruments.
Third Position: Crusader Sterling Pensions
Annual return – 9.86%
Second Position: Sigma Pensions
Annual return – 10.19%%
First Position: First Guarantee Pension
Annual return – 10.42%
How we determine top performers
- The percentage difference between the bid price on the 31st December 2021 and 31st December 2020 was computed to obtain the annual rate of returns for the PFAs.
- This is done across all fund categories where prices are published.
- Bid prices and other associated data are obtained from the websites of all Pension Funds, provided that they are published on their website on the day it was captured. Nairametrics Research also reached out to some of the PFAs in situations where the data could not be found on their website.
- For this ranking, Nairametrics captured the 22 listed Pension Fund Administrators with the PENCOM.
Contact info@nairametrics.com for inquiries about this publication.
