The National Pension Commission (PenCom) is urging Retirement Savings Account(RSA) holders to consider utilising the benefits of the Non-interest Fund VI, particularly those who have reservations about investing in interest-bearing instruments. This fund allocates assets to ethical and non-interest-bearing instruments.
In a statement, PenCom’s Director-General (DG), Mrs. Aisha Dahir-Umar, discussed the Non-interest Fund VI, also known as Fund VI, which was introduced in September 2021 through the issuance of the non-interest operational framework. This framework aims to achieve objectives such as expanding the coverage of the Contributory Pension Scheme (CPS) and enhancing financial inclusion.
Fund VI falls under the multi-fund investment structure sanctioned by PenCom. This structure aligns contributors’ risk preferences with their investment timeframes during different stages of life. RSA holders and retirees are advised to consult their PFAs (Pension Fund Administrators) and refer to the operational framework available on PenCom’s official website for further information.
A key aspect of the multi-fund investment structure is the division of RSA funds into six fund types (Funds I to VI). While Funds I to III cater to active contributors, Fund IV is tailored for retired contributors. Fund V serves participants of the micro pensionplan, and Fund VI is designed as the non-interest fund, accessible to both active and retired contributors.
The Non-interest Fund VI is characterised by its investments in ethical and non-interest-bearing instruments, adhering to principles approved by the Financial Regulation Advisory Council of Experts (FRACE). The fund aims to attract individuals who are hesitant about interest-bearing investments, fostering financial inclusion while maintaining safety and fair returns on investments.
Assets within Fund VI are prohibited from being invested in ventures related to alcohol, pornography, weaponry, gambling, speculation, and other similar activities that go against non-interest finance principles. This is in accordance with the guidelines established by FRACE.
For those interested in transferring their pension savings to the Non-interest Fund VI, the process involves making a formal request to their Pension Fund Administrator (PFA) in accordance with Section 7.6 of the Investment Regulation. Eligible RSA holders can initiate this transfer without any fees, and the PFAs would guide them through the process.
In order to ensure compliance with Islamic Finance principles, PenCom recently introduced the Revised Framework for the Establishment of the Pension Industry Non-Interest Advisory Committee (PINAC). This committee is tasked with monitoring Non-interest Fund VI investments to ensure ethical compliance.
The creation of the Non-interest Fund VI complements the efforts of other financial regulators in promoting non-interest finance principles and providing viable investment options for pension funds through structured products.
