Multi Fund Structure in Pension Fund Management

From time immemorial the essence of pension fund has been to avoid post-retirement poverty for pre-retirees and retirees.

The National Pension Commission (PENCOM) on July 1, 2018 implemented the Retirement Savings Account, RSA, Multi Fund structure.

The primary objective is to resolve the challenges of asset-liability risk management experienced in pension funds by better aligning the risk and return expectations of contributors, better matching of pension assets and liabilities, and diversification of pension fund portfolios.

 

Golden Principles

  • All PFA offer the multi fund structure for the RSA
  • This comprises of four funds which differ based on exposure to variable income instrument
  • The different funds are made to fit the ages and risk profile of contributors

 

The multi fund structure is built on the risk appetite and profile of the pension contributor.

 

Fund Types

Fund 1: For Young contributors based on choice. (Up to 70% of contributors fund may be invested in variable instrument)

Fund 2: For young and middle-aged contributors (Age 49 years and below). Contributors who are less than age 50 are placed in fund 2 by default. (Up to 55% of contributors fund may be invested)

Fund 3: Pre-Retirees (Age 50 years and above). Contributors who are above 50 are placed in fund 3 by default. (Up to 20% of contributors fund may be invested)

Fund 4: For Retirees (Up to 10% of contributors fund may be invested)

Active Choices:

  • A Contributor in Fund II wishing to be assigned to Fund I shall make a formal request to the PFA
  • A Contributor in Fund III wishing to be assigned to Fund II shall also make a formal request to the PFA
  • A Retiree or Active Contributor 50 years and above shall not be allowed to choose Fund I
  • An active Contributor may switch from one Fund type to another Fund type within a PFA once in 12 months, without paying any fees
  • Any additional switches between Funds within a PFA would attract a fee, which would be determined by pencom

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