With the launch of its Sharia-compliant retirement fund, in September 2021, Veritas Glanvills Pensions joins a handful of pension fund administrators(PFA’s) catering for clients in a market valued at over N400 Billion. This move came in response to new regulations and the rise in demand for ethical investment options.
The National Pension Commission, the industry regulator, introduced the non-Interest Fund, known as Retirement Savings Account(RSA) Fund VI under the Multi-Fund structure in July 2021 with the release of the operational framework of the new Fund. Pension contributions of those who opt for this Fund can only be invested in non-interest money and capital market instruments.
There is a gradual adoption of this type of fund as PFA’s are trending towards greater financial inclusion and pension enrolment by catering to an underserved demographic within the Nigerian market, particularly those who adhere to the Islamic tenets, whom this fund is undoubtedly geared towards. This is because Sharia Law has its own unique guidelines around investment.
As a faith-based approach to investment management, Sharia or Halal Investment management is generally considered to be in a category of ethically or socially responsible investing. Investments that sharia scholars universally consider unacceptable are companies whose primary business activities violate the core tenets of Islam, including the manufacture or marketing of alcohol; gambling or gaming activities; conventional interest-based financial services; pork and pork products; and pornography. In addition, most sharia scholars advise against investing in tobacco companies. These investments are described as Haram investments.
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There is an added responsibility imposed on an account holder trying to avoid haram investments activities.
Usually, Muslim investors have to account for any income derived from haram sources and give them away to charitable causes or people in need. This process is known as the purification of tainted investment earnings and has to be done anonymously, so residual benefit in the form of public adulation is avoided. The RSA VI fund then becomes advantageous because it unburdens account holders from having to actively track and process income on investments, and they can instead take a completely passive position knowing that their funds are being managed ethically.
Veritas Glanvills who recently recorded a return on investment of 4.69%, 6.64%, 6.66%, 7.15% and 5.58% in Fund I, II, III, IV and V, respectively at the end of September 2021; ranking 2nd in overall best performing in ROI on all funds, year to date, have since started transferring clients that requested for their RSA to be managed under the Non-interest fund. In a country with a Muslim population of almost 100 million, we can expect more PFA’s to join the party and more clients seeking to make the move the RSA Fund VI.
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