How Pension Funds Perform
Like most things, it begins as a trickle before the floodgates open and it becomes a flood. But there are certain things that you do not rush. Investments (and I do not mean trading, they are two different things) are meant to be carefully researched before you make a final decision.
When you decide, let it be on facts, data, information, and not impulse, according to MoneyCounsellors, a research, data, and information company founded by Michael Oyebola, former managing director at FBN Quest Asset Management.
In November 2019 National Pension Commission (PenCom) opened the transfer window allowing Retirement Savings Accounts (RSA) holders to switch Pension Fund Administrators (PFAs).
Since records began, 143,805 RSA holders have switched from one PFA to another. The transfer window has now had 2 full years of being in operation. In 2022 transfers, totaling 92,413 was 90.2% higher than in 2021 (48,953).
In value terms, 2022 – N361.5 billion was 110.5% higher than 2021, which had a value of N171.2 billion. The total value of all transfers since the transfer window’s inception was N552 billion.
The value of transfers on a quarterly basis is still less than 1% of total assets across the pension industry. Nevertheless, the number of transfers and the value are growing and whilst two years may be too short a time to jump to conclusions, it is a market to watch only complacent PFA’s will ignore.
Switching PFA’s
A couple of questions to ask yourself:
• Would you switch PFAs?
• If the answer is yes or maybe. What criteria would you use to make such an important decision?
Performance of Pension Funds for January 2023 and since the inception of each fund
Fund I is accessible strictly by formal request of the contributor and only for those aged 49 years and below. Exposure to Variable Income Instruments is 75%.
Variable income instruments are defined as investments in Ordinary Shares and participation units of Open Close-ended and Hybrid Funds; Real Estate Investment trusts; Infrastructure Funds; and Private Equity Funds.
Stanbic IBTC Pensions Fund I continue to lead the performance table growing since inception in July 2018 by 115.41%.
The other four in the top five are Veritas Glanvills Pensions Fund I (81.99%), Oak Pensions Fund I (72.96%), Leadway Pensure PFA Fund I (69.87%), and Access Pensions Fund I (65.91%). The average return of all Fund I’s since inception was 54.78%.
Fund II Fund II is the default fund for all active pension fund contributors that are 49 years and below. Exposure to Variable Income Instruments is 55%.
Variable income instruments are defined as investments in Ordinary Shares and participation units of Open Close-ended and Hybrid Funds; Real Estate Investment Trust; Infrastructure Funds; and Private Equity Funds.
The performance of Fund II since inception is led by Premium Pension Fund II with a return of 541.01%, followed by ARM Pensions Fund II (510.53%), Stanbic IBTC Pension Managers Fund II (488.66%), NLPC PFA Fund II (476.08%) and FCMB Pensions Fund II (473.05%).
Nupemco Fund II and NPF Pensions Fund II were late starters. The average return of all Fund II’s since inception was 366.94%. Fund III is the default fund for active contributors that are 50 years and above. Exposure to Variable Income Instruments is 20%.
Variable income instruments are defined as investments in Ordinary Shares and participation units of Open Close-ended and Hybrid Funds; Real Estate Investment Trust; Infrastructure Funds; and Private Equity Funds.
Since the inception of Fund III in 2018, Tangerine APT Pensions Fund II has returned 80.83%, NLPC PFA Fund II (79.61%), Guaranty Trust Pension Managers Fund III (78.63%, Radix Pension Managers Fund III (76.80% and Fidelity Pension Managers Fund III (75.93%).
The average return of all Fund III’s since inception was 66.25%.
Fund IV Fund IV is strictly for retirees only. Exposure to Variable Income Instruments is 10%. Variable income instruments are defined as investments in Ordinary Shares and participation units of Open Close-ended and Hybrid Funds; Real Estate Investment Trust; Infrastructure Funds; and Private Equity Funds.
For Fund IV, which is for retirees, since inception, the leader of the pack is the Stanbic IBTC Fund IV which has returned to 31 January 2023 480.37%. The Stanbic IBTC Fund is followed by NLPC PFA Fund IV (429.85%), Oak Pensions Fund IV (416.44%), Veritas Glanvills Fund IV (416.41%) and ARM Pensions Fund IV (411.03%).
It is worth noting that despite all Fund IVs generating an average of return of 13.32% (audited) over 5 years to December 2021, PenCom only awarded an average pension enhancement for 2023, based on October 2021 data of just 8.5%.
The withdrawal rate, i.e., payment of pension is just under 10%, meaning retirement funds are growing faster than retirees are being paid.
Fund V Fund V is only for Micro Pension Fund contributors. Exposure to Variable Income Instruments is 5%. Variable income instruments are defined as investments in Ordinary Shares and participation units of Open Close-ended and Hybrid Funds; Real Estate Investment Trust; Infrastructure Funds; and Private Equity Funds.
Whilst not all PFA’s offer Fund V, the performance of those that do and publish prices and other information on their website shows that the ranking of the top 5 Fund V for January 2023 and since inception were as follows:
Fund VI (Active) is for those that choose to have their contributions invested in Non-interest Money and Capital Market Products. Exposure to Variable Income Instruments is 55%.
Variable income instruments are defined as investments in Ordinary Shares and participation units of Open Close-ended and Hybrid Funds; Real Estate Investment Trust; Infrastructure Funds; and Private Equity Funds.
For the few that offer and publish information on Fund VI (Active), the table and chart represent the respective fund performances in the month of January and since inception to 31 January 2023:
Fund VI (Retiree) is for those that choose to have their contributions invested in Non-interest Money and Capital Market Products. Exposure to Variable Income Instruments is 10%.
Variable income instruments are defined as investments in Ordinary Shares and participation units of Open Close-ended and Hybrid Funds; Real Estate Investment Trust; Infrastructure Funds; and Private Equity Funds.
For the few that offer and publish information on the Fund VI (Retiree), the table and chart represent the respective fund performances for the month of January and since inception to 31 January 2023: #How Pension Funds Perform
