NPRA reviews investment guidelines for pension funds
The National Pensions Regulatory Authority (NPRA) has started reviewing the investment guidelines governing where and how the second tier pension funds can be invested in the country.
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The move is a response to changing trends in the economic landscape. It also to help address earlier concerns by corporate trustees and other stakeholders in the pension business that the current guidelines were too restrictive and, therefore, inimical to the growth of the industry.
The General Manager of PenTrust, Mrs Victoria Armah, who disclosed this to the Graphic Business in Accra, explained that the authority had formed a committee, comprising some industry players and experts to help put the new guidelines together.
The committee has since come out with new modalities that should guide the new regulations on how much of pension fund can be invested where, Mrs Armah told the paper after PentTrust’s maiden scheme members’ general meeting in the Accra.
The meeting, which was the first in the industry, brought together members of the company’s three schemes – the master trust scheme, the mandatory tier two scheme and the voluntary three scheme – to listen to how their investments are faring under PenTrust’s care.
Impact of new guidelines
A source at the NPRA told the paper that the new regulations on the investment of pension funds were expected to take effect by the end of this year.
“I do not want to preempt but what I can say it latest by January 1, 2017, the new rules would have taken effect,” the source said.
Although the new pension act took effect in 2010, it was only in 2012 that management of pension funds by corporate trustees started gaining momentum.
To help guide the growth of the infant industry, the NPRA introduced the investment regulations which limited the amount of funds trustees, through their fund managers and investment analysts, could invest in risky yet profitable areas such as stocks and real estate.
About 70 per cent of the funds were to be invested in government securities, mainly government bonds and treasury bills, with smaller amounts going into fixed deposits, among other investmet instruments.
The ideal was to help prevent profit-savvy trustees from investing prospective pensioners funds into risky instruments that may go bad.
But after watching the economic environment change significantly since the first guidelines were issued, the source at the NPRA said the authority had sided with earlier concerns that a revision was needed to “help optimise investment returns.”
“The current guidelines have been in operation for some time now and you will agree with me that the economic environment has changed since 2012, when the trustees started operating the third tier,” the source said.
“So, we thought that we needed to revise them, taking into consideration current developments and the need to be abreast with the the times,” the source.
PenTrust’s GM was confident the new regulations will help inspire confidence and growth in the sector.
Growth of PenTrust schemes
Pentrust, which started operations three years ago, has since recorded remarkable growth in members and funds under management.
After starting with two members in 2013, membership under the company’s tier two and master trust schemes have grown to 892 as of December 2015 on the back of aggressive marketing strategies adopted by mangagement.
In terms of assets under management, the tier two scheme has growth from GH¢3,107.2 in 2013 to GH¢4.7 million in December, last year.
That of the master trust scheme has also grown to GH¢3,936.94 in 2013 to GH¢1.3 million last year.
Mrs Armah thanked the company’s customers for their confidence in the company and urged them to be prompt in the payment of their employees’ contributions.
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She bemoaned the situation where some employers mostly failed remit the contributions of their staff on or behalf the 15 of every month, explaining such a practice was having a toll on the service delivery of the company to customers.