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The National Pension Commission, PenCom, has released a multi-fund structure VI that would enhance investments in the non-interest financing sector, deepen financial inclusion, and encourage voluntary contributions by holders of retirement savings accounts, or RSAs.

This was stated by Dr. Adam Abubakar, ANUTI Ethical Consulting Limited’s Lead Consultant on Islamic Finance, during a talk on “Islamic Finance and the Nigerian Pension Industry.”

Dr. Abubakar explained that the Nigerian pension system has been plagued by unsustainable pension liabilities, a lack of adequate and timely budgetary supply, and a rise in the number of employees since 2004.

The challenges necessitated pension reform in Nigeria, which resulted in the Reform Act of 2004, which was modeled after the Republic of Chile, and which resulted in the establishment of a uniform contributory private sector managed and fully funded pension system for both the public and private sectors in Nigeria.

According to him, the pension reform act of 2014, as modified, requires registered fund pension administrators to administer and invest pension funds. The money should be stored by registered pension fund custodians under the supervision of the regulator, the Nigerian Pension Commission (PenCom).

The system is divided into three parts: the regulator (PenCom), the administrators (PFAs), who number around 22 and the custodian (PFC), who hold the fund.

He went on to say that the system allows both public and private sector employees and employers to contribute a minimum of 8% and 10% of their basic income, respectively, from their basic salary. In addition, the PRA mandates that pension funds be invested in certain registered and recognized investment products, such as bonds, treasury bills, benchers, shares, and other debt instruments issued by registered corporate organizations.

He explained the multi-funds structure from I through VI, saying Fund I is for contributors under the age of 50. They can be in fund II if they don’t wish to be in default; fund III is the default for contributors over 50. Fund IV is for retirees, fund V is for smaller pension plans, and fund VI is for the ethical non-interest fund, above those still in active duty.

In his conclusion on the economic benefits of the non-Interest Finance Fund, Dr. Abubakar stated that Nigeria has one of the most robust legal frameworks in Islamic finance, citing provisions from regulators such as the CBN, SEC, NAICOM, and PenCom, all of which have comprehensive legal frameworks for non-interest finance in the country.


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