Friday, December 06, 2021 / 11:00 AM / By Rebecca Ebokpo  of AELEX / Header Image Credit: AELEX

The NationalPension Commission (PENCOM) recently introduced a new category of fund whichcomplies with sharia principles of investment. The Non-Interest Fund (Fund VI) permitspension contributors and retirees to choose the preferred investment portfolio theywould want their pension contributions remitted to.

TheOperational Framework

By theOperational Framework regulating the Fund VI, contributions made to the fundcannot be invested in the production or trading of alcohol, pornography, weaponry,gambling/betting, speculation, interest earning ventures and other similarundertakings that are contrary to Sharia principles. Furthermore, the scope ofthe prohibited schemes for the Fund VI is to be determined from time to time bythe Financial Regulation Advisory Council of Experts (FRACE), an advisory bodyon Islamic Banking and Finance established by the Central Bank of Nigeria (CBN)to advice on matters relating to Islamic commercial jurisprudence.

TheOperational Framework provides that the Fund VI is to be managed in twoseparate accounts by Pension Fund Administrators (PFAs): for active RetirementSavings Accounts contributors, and retirees. Both active contributors andretirees will be able to move their contributions to the Active Fund VI orRetiree Fund VI, respectively.

PFAs are alsoprohibited from investing contributions to the Fund in speculative instruments.The Operational Framework sets the maximum limits for the various allowableclasses of assets that the Fund can be invested in, and further provides themodalities for Retirement Savings Account holders to migrate to the Fund VI,amongst other provisions. The Fund VI is in line with the multi fund investmentstructure introduced by PENCOM in 2018 which gives more freedom to retirees andcontributors to invest their funds according to their risk enthusiasm. TheOperational Frameworks can be downloaded here

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