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Pension assets seen growing after March break

Pension assets seen growing after March break

Nigeria’s net pension assets returned to growth in April 2024 after taking a break in March 2024 from a 17 months rally that began since October 2022.

Figures released by the National Pension Commission (PenCom) shows that total net pension assets grew by N126.3 billion to N19.79 trillion at the end of April 2024 as against N19.67 trillion in March 2024.

This is as the number of registered contributors continued on growth trajectory, moving from 10, 280, 956 participants in March 2024 to 10,315,034 at the end of April 2024.

The pension sector had begun a 17-month consecutive growth rally that started in October 2022, before it came to a break in March 2024 when it recorded a decline. The pension assets dropped by N84.30 billion in March 2024, from N19.76 trillion in February 2024 to N19.67 trillion.

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Akinbola Akintola, head, Research & Investor Relations at PenOp explaining growth in each of the funds type said Retirement Savings Account (RSA) Funds are categorized into six distinct funds, each serving different risk profiles and investment strategies.
“Fund II, which is the largest, saw its assets grow to N8.33 trillion in March, up from N8.21 trillion in February. “

Akintola said Fund I, known for its higher risk and higher potential returns, increased to N187.74 billion in March, up from N179.04 billion in February. Fund III, typically for those closer to retirement, grew to N5.17 trillion in March from N5.11 trillion in February.

2Meanwhile, Fund IV, which is designed for retirees, saw an increase to N1.43 trillion in March from N1.41 trillion in February. This steady growth across all funds highlights the robust management and the increasing confidence in the RSA investment strategies.”

The pension sector had begun a 17-month consecutive growth rally that started in October 2022, before it came to a break in March 2024 when it recorded a decline. The pension assets dropped by N84.30.3 billion in March 2024, from N19.76 trillion in February 2024 to N19.67 trillion.

Data PenCom’s showed in that from a decline of N1.50 billion in September 2022, the pension assets began its 17 months growth journey, growing by N164.44 billion in October 2022; N203.17 billion in November 2022, and closing the year in December with N199.17 billion.

The monthly growth continued in the whole of 2023, growing significantly in October same year by N388.68 billion and N428.13 billion December 2023, but however climaxed when the pension assets rose by N1.17 trillion in January 2024, before finally ending the rally in Mach 2024 when it dropped by N90.3 billion.

Analysts at FBNQuest Research had said the reduction in March marks an end to the consecutive monthly growth in pension assets that started in Oct ’22.

Explaining the reason for the drop, Agudah Oguche, chief executive officer, Pension Fund Operators Association of Nigeria (PenOp) said it is important to note that pension assets under management are quoted as net assets. “This means that the figure has already accounted for the liabilities under the scheme. These liabilities include pay-out to retirees.”

Oguche said pension Funds invest in fixed and variable income instruments, and as the name suggests, fixed-income investments have a fixed return and are considered the safest forms of investment like the Federal Government Bonds.

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“Variable Income instruments are investments where the returns are not fixed. Naturally, these are riskier but have the potential for far higher rate of return than traditional fixed-income instruments. One such example is listed equities.”

According to him, the conservative nature of pension fund investments means that fund managers naturally gravitate towards fixed-income instruments because their priority is to keep contributors’ money safe.

However, to provide the best value for contributors, pension funds must invest a percentage of those funds in variable income instruments, and by nature, these instruments perform differently from time to time.

“For example, the NGX all share index was one of the best-performing equities index in the world in 2023, but in the last two months, the index is down about 4 percent, the PenOp CEO said.

He said overall, the net pension assets has grown over the last quarter. This is reflected in the pension assets growing from N18.3 trillion in December 2023 to N19.67 trillion in March 2023, stating that the impressive growth is in no small part due to the investment by Pension Fund Administrators (PFAs) in variable income instruments.

“What is most important for pension fund investments is returns over a long period of time, not just in a monthly basis.”