September 26, 2022

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Expert seeks reduced impact of inflation on pension

The Chairman/Chief Executive Officer, Achor Actuarial Services Limited, Dr Pius Apere, has said it is important for Pension Fund Administrators to explore investment areas that will help to reduce the effect of inflation on the growing funds in their custody.

He said this in a presentation on ‘Recapitalisation for PFAs and the welfare of Nigerian pensioners’.

He said, “On the other hand, the stakeholders expect that with the new increase in the minimum share capital requirement, the investment of funds generated by the PFAs, which is determined by the Pension Fund Custodians as stipulated by the laws guiding pension fund investment, should explore other investment opportunities in the foreign investment markets, risky investments such as infrastructure, property, structured products and others, in order to provide real returns to contributors to reduce the effect of rising inflation.

“However, this is likely to expose the RSA holders to significant investment risks since investment decisions are taken by them.”

Apere said there was no evidence suggesting that well-capitalised PFAs would invest the pension assets any more efficiently than those with lower capital.

In fact, he added, capital alone would not positively motivate the long-term decisions of PFAs on how to invest pension fund assets, given the dearth of investible assets in Nigeria.

As the investment risk was borne by the contributors under the CPS, he said, the greater capital requirements on the PFAs did not ensure better pensions in the future.

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