The Nigerian Pension industry consolidated on the gains recorded in the first half of the year, albeit at a slower pace in Q3 2022, printing an average return of 1.55% between July and September 2022.
This is according to an analysis carried out by Nairalytics – the research arm of Nairametrics. The firms recorded an average return of 5.02% between January and June 2022, as all 18 PFAs posted positive returns.
However, bearish sentiments in the Nigerian equities market and other variable assets have hampered asset growths in the third quarter despite recording impressive returns in the first half of the year. The Nigerian stock market dipped by 5.39% in the third quarter of the year, with all sub-indices tracked by the NGX apart from the growth index all recording negative growth in the quarter under review.
On the flip side, fixed income assets are beginning to grow in returns compared to variable assets, which is evident in the performance of the fund III and Fund IV categories of the PFAs. This is largely due to the high-interest rate regime of the CBN in a bid to curb the rising rate of inflation in the country, which has seen tbills and government bond rates improve in the past months.
Meanwhile, due to the opening of the transfer window, the competition in the industry have also grown significantly as the number of RSA transfers hit a record high in Q2 2022.
A total of 14,821 RSA holders switched pension managers in the second quarter of the year, bringing the total number of RSA transfers since the inception in Q4 2020 to 78,549.
Additionally, the industry has also witnessed several mergers and acquisitions in 2022 in their bid to meet the required minimum Regulatory Capital of N5 billion, which was increased from N1 billion by the Nigerian Pension Commission., leading to a reduction of the number of PFAs from 22 to 20.
List of acquisitions and mergers
- Earlier in the year, PENCOM approved the acquisition of AIICO Pension Managers Limited by FCMB Pensions Limited, the merger between Tangerine Pensions Limited and APT Pension Funds Managers Limited, and the subsequent change of name of the merged entity to Tangerine APT Pensions Limited.
- The Commission also approved the acquisition of IEI-Anchor Pension Managers Limited by Norrenberger, after the latter acquired the majority shareholder of the company, IEI Plc.
- Even more recently, Access Holding received regulatory approval to acquire a majority equity stake in First Guarantee Pension Limited.
Meanwhile, despite the positive returns printed by the PFAs, an average return of 1.58% compared to an inflation rate of 20.52%, indicates a negative real return of 18.94%. While this appears significantly in contrast to the country’s inflation rate, it is not surprising considering the conservative nature of Nigerian PFAs’ investment portfolio.
Specifically, 63% of the aggregate industry investment is directed towards FGN Securities, which includes bonds, treasury bills, sukuk bonds, green bonds, and agency bonds. It is worth noting that these asset classes are usually with low-interest rates, hence having a significant impact on the bottom-line returns printed by the pension administrators.
However, the industry has been able to create varying fund categories based on risk appetite, which gives PFAs room to invest in more variable assets, although under strict regulatory guidelines.
In line with Nairametrics’ regular ranking of various sectors in the Nigerian economy, here is a compilation of the best performing Pension Fund Administrators (PFAs) in the third quarter of the 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. The fund category recorded an average return of 0.94% in Q3 2022, the lowest recorded relative to other fund categories. Similarly, three PFAs recorded negative returns in this category.
Third position – Premium Pension Limited
Q3 2022 return – 1.88%
Second position – Veritas Glanvills Pensions Limited
Q3 2022 return – 2.07%
First position – First Guarantee Pension Limited
Q3 2022 return – 3.34%
RSA Fund II
The RSA Fund II is the default fund for contributors who are 49 years and below, although they are at liberty to shift to Fund I based on their risk appetite. It is worth noting that fund II with N6.27 trillion contributors’ fund accounts for the largest share of the total net assets in the pension industry as of July 2022
The RSA Fund II recorded a return on investment of 1.18% in the third quarter of the year, with only one PFA recording a negative return of 0.19%.
Third position – ARM Pension Managers
Q3 2022 return – 1.62%
Second position – Crusader Sterling Pensions Limited
Q3 2022 return – 1.78%
First position – Oak Pensions Limited
Q3 2022 return – 2.01%
RSA Fund III
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.
They recorded an average of 1.79% returns on investment in the period under review.
Third position – Premium Pension Limited
Q3 2022 return – 2.24%
Second position – Leadway Pensure PFA Limited
Q3 2022 return – 2.34%
First position – First Guarantee Pension Limited
Q3 2022 return – 2.50%
RSA Fund IV
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.
The fund recorded a 2.29% return on investment in Q3 2022.
Third position – Nigerian University Pension Management Company
Q3 2022 return – 2.55%
Second position – Leadway Pensure PFA Limited
Q3 2022 return – 2.74%
First position – Oak Pensions Limited
Q3 2022 return – 2.77%
Final ranking
On average, in the third quarter of 2022 the best performer is ;
First Guarantee Pension led the ranking with an average return of 2.38%, followed by Premium Pensions and Veritas Glanvills Pensions with 2.06% and 2.01% respectively.
Others include Crusader Sterling, Sigma Pensions, and Leadway Pensure.
How we determine top performers
- The percentage difference between the bid price on 30th June 2022 and 30th September 2022 was computed to obtain the rate of returns for the PFAs.
- This is done across all fund categories where prices are published, that is Fund I to IV.
- The overall performance was obtained by averaging the ROI of the PFAs across the four fund categories.
- 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 18 listed Pension Fund Administrators with the PENCOM. GT Pension and Fidelity Pension Managers were not considered in this ranking due to inability to access their fund prices.
Good info