Seventeen Pension Fund Administrators (PFAs) in Nigeria printed an average return of 2.81% in the month of January 2024, recording positive returns across the four retirement savings accounts tracked by Nairalytics, the research arm of Nairametrics.
The PFAs were able to record impressive performances despite economic doldrums ravaging the country, which had impacted the fixed income secondary market in the review month. However, higher auction yields on fixed income as well as significant rally at the equities market have kept returns elevated.
Breakdown of the data, showed that the RSA I fund recorded the highest return in the month under review with a growth of 4.11%, followed by the RSA II fund with 3.67%. RSA III and IV recorded returns of 2.1% and 1.38% respectively.
It is worth noting that the performance for the month follows the typical investment relationship between risk and return, which states that the higher the risk, the higher the return and vice versa. The RSA fund I, which is the riskiest from the list recorded the highest return while RSA IV, which has the lowest risk printed the lowest return, in line with the multi-fund structure (Find explanation below).
Breakdown of industry investment
According to data from the National Pension Commission (PenCom), the industry assets rose to N18.36 trillion in December 2023 from N17.93 trillion recorded in the previous month. The breakdown of the fund reveals that 64.9% of the total funds were invested in federal government securities such as FGN bonds, Treasury Bills, Sukuk bonds etc.
- Also, about 10.4% valued at N1.91 trillion was invested in corporate debt securities, while money market instruments accounted for 9.1% of the fund, with a value of N1.67 trillion.
- Meanwhile, the local equities houses N1.57 trillion of the pension fund assets, representing 8.6% of the entire fund, while mutual funds stood at N104.9 billion, representing 0.6% of the total fund.
The PFAs continue to outwit themselves in investment returns and customer service as contributors become more aware of the transfer window, which allows them to change PFAs. Specifically, 101,820 contributors switched PFAs in 2023, moving about N462 billion.
Best performing PFAs by RSA accounts
In terms of the average performance of the PFAs in January 2024, NPF Pensions led the list with an average return of 9.47%, followed by Pensions Alliance Limited (3.63%), and Tangerine Apt Pensions with a return of 3.56%.
Crusader Sterling and Oak Pensions were not included in this analysis due to incomplete information.
RSA Fund I
This fund has the highest allocation of risky or variable income instruments and participation is strictly upon a formal request from a contributor but NOT accessible to Retirees and active contributors of 50 years and above. The RSA Fund I is suitable for people who want to invest in high-risk instruments with higher rewards.
All the 17 PFAs recorded positive return in their RSA Fund I.
- First position: NPF Pensions – 13.33%
- Second position: Leadway Pensure PFA – 5.61%
- Third position: Tangerine Apt Pensions – 5.57%
RSA Fund II
This is the default fund for RSA holders of 49 years and below. It is balanced and suitable for middle-aged contributors as well as those with a medium-risk appetite. It is designed to be less risky with reduced allocation to variable income instruments compared to Fund I.
- First position: NPF Pensions – 11.79%
- Second position: Trustfund Pensions – 5.71%
- Third position: Pensions Alliance Limited – 5.19%
RSA Fund III
This is the default fund for RSA holders between the ages of 50 and 60 years. It is a conservative fund that is designed for contributors close to retirement and contributors with a low-risk appetite. Although it is suited for contributors between the ages of 50 and 60 years, younger contributors may opt to participate in this fund category.
- First position: NPF Pensions – 8.41%
- Second position: Trustfund Pensions – 2.89%
- Third position: Pensions Alliance Limited – 2.85%
RSA Fund IV
The RSA Fund IV is exclusively designed for retirees and members of Funds I, II, and III are not eligible to buy into Fund IV, except upon retirement. Also, members of this fund are not allowed to move out of the fund.
- First position: NPF Pensions – 4.35%
- Second position: Veritas Glanvills Pensions – 2.24%
- Third position: Trustfund Pensions – 1.84%
About multi-Fund structure
The Multi-Fund structure is a system designed by the National Pension Commission (PenCom) to place RSA holders in one of four different funds based on their age and risk tolerance.
- The RSA Fund I is an aggressive fund meant for active contributors that are 49 years and below. Notably, the principal purpose of the fund is to maximise returns on investment as about 20% to 75% of the funds are invested in variable income instruments.
- RSA Fund II is a balanced fund with the intention of capital preservation while pursuing fair returns in the long term. Like the RSA Fund I, it is meant for active contributors who are 49 years and below, however, it is less risky as about 10% to 55% of the funds are invested in variable assets.
- The RSA Fund III is a more conservative fund, with the primary aim of capital preservation, with about 5% to 20% of the fund being invested in variable assets. It is the default fund for contributors who are 50 years and above.
- RSA Fund IV on the other hand is a fund strictly for retirees and mostly conservative. up to 10% of the fund can be invested in variable income instruments.