OPERATIONAL FRAMEWORK FOR

NON-INTEREST FUND
(F UND VI)
TABLE OF CONTENT
Section 1.0 Introduction………………………………………………………………. 3

1.1 Preamble……………………………………….. ………...............3

1.2 Objectives of the Framework………………………….…….……3

1.3 Definition of Terms………..………………………………………..4

1.4 Table of Abbreviations …………………………………………….6

1.5 Legal Framework...………………………………………………...6

1.6 Form and Content …………………………………………………7

Section 2.0 Rules of General Application…………………………… ……………...8

2.1 Basic Principles………………………………………………….…8

2.2 Creation of Separate Funds……………………………………….8

2.3 Prohibition of Speculation……………………………………...…9

2.4 Allowable Instruments ………………………………………….…9

2.5 Quality of Instruments/Securities……………………………… 10

2.6 Investment Limits ………………………………………………. 11

2.7 Violation of Investment Limits …………………………………..15

2.8 Eligibility …………………………………………………………..15

2.9 Custody of Non-Interest Fund…………………………………...15

Section 3.0 Governance Structure of Fund VI ……….……………………………16

3.1 Shari’ah Board of Advisers………………………………………16

Section 4.0 Commission and Fees ………………………………………………….17

Section 5.0 Portfolio Composition of Fund VI ……………………………………. 17

Section 6.0 Transfer Modalities ……………………………………………………..18

Section 7.0 Capacity Building/Training …………………………………………….19

Section 8.0 Audit, Accounting and Disclosure Requirements ……………… 19

Section 9.0 Review and Enquiries ………………………………………………... 21

Public
Operational Framework For Non-Interest Fund (Fund VI) Page 2 of 21
1.0 INTRODUCTION

1.1 Preamble
1.1.1 There has been increasing demand by RSA holders for the opportunity
to invest their retirement savings in non-interest instruments. This led
to series of engagements with other financial regulators and
stakeholders towards creating a Non-Interest Fund (based on Islamic
Shari’ah Principles) to cater for the needs of this category of RSA
holders.

1.1.2 The Regulation on Investment of Pension Fund Assets (Investment

Regulation) defined ‘Non-interest compliant instruments’ as “financial
securities and specialist investment funds that comply with the
provisions of Islamic Commercial Jurisprudence (Shari’ah) and any
other established non-interest principles, as approved by the Financial
Regulation Advisory Council of Experts (FRACE), or any other body,
constituted by the Central Bank of Nigeria and/or Securities and
Exchange Commission, from time to time”.

1.2 Objectives of the Framework

1.2.1 To establish standards and procedure for the management of Fund VI
by licensed PFAs in Non-Interest instruments as provided in Section
7.3 of the Investment Regulation.

1.2.2 To assist in expanding the coverage of the Contributory Pension

Scheme (CPS) by attracting employees with reservations about
investments in Non-shariah compliant instruments.

1.2.3 To promote financial inclusion within the Nigerian Financial System.

Public
Operational Framework For Non-Interest Fund (Fund VI) Page 3 of 21
1.3 Definition of Terms

SN TERM DEFINITION
Active RSA contributors Employees in active service who is making
1 periodic pension contributions to his
registered Retirement Savings Account
(RSA) in Funds I,II or III with a licensed PFA.
Contributory Pension A Contributory Pension Scheme established
2 Scheme under the Pension Reform Act, 2014 for any
employment in the Federal Republic of
Nigeria for payment of retirement benefits of
employees in the formal and informal sector.
Conventional Non-Shariah Financial securities that do not comply with
3 compliant instruments Shari’ah principles and not sanctioned by the
Financial Regulation Advisory Council of
Experts.
Conventional Assets/Securities/Instruments that are not
4 Assets/securities/instruments based on Islamic shari’ah principles
Ethical Investment A specific kind of financial operation whose
5 purpose is to deliver a social impact.
Financial Regulation An advisory body on Islamic Banking and
6 Advisory Council of Experts Finance established by the Central Bank of
Nigeria (CBN) to advice on matters relating to
Islamic commercial jurisprudence for the
effective regulation and supervision of Non-
Interest Financial Institutions and products in
Nigeria.
Gharar Any commercial transaction associated with
6 uncertainty, deception, and excessive
speculation. It has been described as “the
sale of what is not yet present,” such as crops
not yet harvested or fish not yet netted.
Mudarabah contract (profit- A form of Islamic equity-based
7 sharing and loss-bearing partnership contract, commonly known as a
partnership) profit-sharing contract. It is a
partnership contract where the capital
provider contributes the capital while the
manager provides managerial skills to
manage the Mudarabah capital accordingly.
Non-Interest Compliant Financial securities and specialist investment
8 Instruments funds that comply with the provisions of
Islamic Commercial Jurisprudence (Shari’ah)
Non-Interest Fund (Fund VI) A Fund type managed by PFAs whose assets
9 are invested in instruments that are both
ethical and Non-interest bearing in line with
Islamic Shariah Principles.
Pension Fund Administrator A company licensed by National Pension
10

Public
Operational Framework For Non-Interest Fund (Fund VI) Page 4 of 21
 (PFAs) Commission to manage and administer
pension funds and assets
PRA 2014 An Act of the National Assembly that
11 established the Contributory Pension
Scheme and make provisions for its uniform
implementation for Public and Private Sector
in Nigeria and Related Matters.
Prospective Retirees An employee with contributions in RSA Fund
12 III (above 50 years) who is making
preparations for retirement from active
service or has applied for retirement benefits.
Regulation on Investment of The Investment Regulation issued by the
13 Pension Fund Assets Commission to provide rules and standards
(Investment Regulation) for the investment of pension fund assets.
The requirements of the Regulation are
consistent with the provisions of the
PRA, 2014.
Retiree Retirees with retirement savings in Fund IV
14 who are on programmed withdrawal and
retirees on Life Annuity payments that have
retired from active service.

RSA Holder An employee (including self-employed) who

15 registered and opened a Retirement Savings
Account (RSA) with a licensed PFA.
Shariah Islamic religious law that governs aspects of
16 day-to-day life in Islam including Islamic
commercial jurisprudence, market and
financial transactions.
Shari’ah Board of Advisers Persons or institution(s), deemed competent
17 on Islamic financial services to advice on
Islamic, legal and wider Shariah matters
related to all aspects of Islamic financial
products.
Sukuk (Islamic Bond) An Islamic financial instrument that involves
18 a direct asset ownership and complies with
Non-Interest Islamic financial principles.
The Commission National Pension Commission
19
Wakala Bil- A method whereby Islamic financial
20 Istithmar (investment agency institutions manage funds on behalf of their
contract) customers. This involves providing agency
(wakala) charges against specific fund
management fees.

Public
Operational Framework For Non-Interest Fund (Fund VI) Page 5 of 21
1.4 Table of Abbreviations

SN TERM DEFINITION
AAIOFI Accounting and Auditing Organisation for Islamic
1 Financial Institutions
ABS Asset Backed Securities
2
FRACE Financial Regulation Advisory Council of Experts
3
FRCN Financial Reporting Council of Nigeria
4
GDN Global Depository Notes
5
GDR Global Depository Receipts
6
IFRS International Financial Reporting Standards
7
IFSB Islamic Financial Services Board
8
ISPO Irrevocable Standing Payment Order
9
MBS Mortgage Backed Securities
10
NFIS National Financial Inclusion Strategy, which provides
11 objectives, priorities and principles for driving
financial inclusion in Nigeria.
NAV Net Asset Value, which means the summation of the
12 value of Pension Fund Assets minus allowable
expenses
RSA Retirement Savings Account
13

1.5 Legal Framework

1.5.1 Section 85 of the PRA 2014 provides that all contributions shall be
invested by the PFAs with the objectives of safety and maintenance
of fair returns on amount invested in accordance with regulations and
guidelines issued by the Commission.

1.5.2. Section 4.0 of the Regulation on Investment of Pension Fund Assets

(Investment Regulation) required PFAs to invest Fund VI assets in
instruments that are both Ethical and Non-interest bearing.

Public
Operational Framework For Non-Interest Fund (Fund VI) Page 6 of 21
1.5.3 Section 7.3 of the Investment Regulation established the Non-Interest
Fund (Fund VI) among the Fund types to be managed by licensed
Pension Fund Administrators (PFAs).

1.5.4 The establishment of Fund VI is in line with Section 1.4 of the

amended Regulation on the Investment of Pension Fund Assets,
which mandates licensed PFAs to maintain a Multi Fund Structure to
govern the investment of RSA Funds under their management.

1.6 Form and Content

The Operational Framework on Non-interest Fund is divided into

Nine (9) Sections.

Section One (1) is the introduction and provides a background on

the imperative for the establishment of Fund VI as well as the
objectives of the Framework. Section Two (2) outlines the definition
of terms and addresses the basic principles for the investment and
management of the Non-Interest Fund by PFAs.

Section Three (3) discusses the Governance Structure of the Non-

Interest Fund while Section Four (4) covers issues relating to
Commission and Fees.

The Portfolio composition of Fund VI assets and the phasing out

arrangement of non-shari’ah compliant assets are provided in
Section Five (5). Section Six (6) addresses the Transfer Modalities
for Fund VI. Capacity Building and Training towards the
establishment of Fund VI are discussed in Section Seven (7). The
Audit, Accounting and Disclosure requirements of Fund VI are
discussed in Section Eight (8). Section 9 establishes the review and
enquiries process.

Public
Operational Framework For Non-Interest Fund (Fund VI) Page 7 of 21
 The requirements of this Framework are consistent with the provisions
of the Pension Reform Act 2014 (PRA 2014).

2.0 RULES OF GENERAL APPLICATION

2.1 Basic Principles

2.1.1 The overall objectives of pension fund investments shall be safety
and maintenance of fair returns on investments in line with Section
85 of the PRA 2014 and regulations/ guidelines issued by the
Commission.

2.1.2 Fund VI assets shall not be invested in the production or trading of

alcohol, pornography, weaponry, gambling/betting, speculation,
interest earning ventures and other ventures of similar nature
contrary to Sharia principles and as may be determined by FRACE
from time to time.

2.1.3 Fund VI shall be based on the principles of Wakala Bil-

Istithmar (investment agency contract) with the PFA acting as the
investment agent for active RSA contributors in Funds VI.

2.1.4 The principle of Mudarabah contract (profit-sharing and loss-bearing

partnership) shall be used for retirees in Fund IV who opted for Fund
VI.
2.2 Creation of Separate Funds
2.2.1 Fund VI shall be separated into two funds for Active RSA holders
and Retirees. PFAs shall manage and invest the assets of the Funds
separately in accordance with the rules outlined by this Framework
and extant Regulations issued by the Commission in this regard.

2.2.2 Pursuant to 2.2.1 above, PFAs shall create and maintain two
separate Non-Interest funds as follows:

Public
Operational Framework For Non-Interest Fund (Fund VI) Page 8 of 21
 i. Active Non Interest Fund (Active Fund VI): For contributors in
Funds I, II and III that have elected to move their contributions
to Fund VI.
ii. Retiree Non Interest Fund (Retiree Fund VI): For Retirees in
Fund IV that move their contributions to Retiree Fund VI.

iii. RSA contributors in Fund III can move their contributions

directly to Retiree Fund VI at the time off retirement.
2.3 Prohibition of Speculation
2.3.1 Fund VI assets are to be invested in instruments that are free from
speculation and uncertainty that might lead to destruction or loss,
otherwise known as ‘Gharar’ under the Islamic commercial
jurisprudence.

2.3.2 Pursuant to 2.3.1 above, the fundamental value of a security with

respect to the annual income it may bring such as dividends, is to be
considered by PFAs before future price considerations. Derivative
products such as futures contracts, Swaps, options and Forwards
are considered as speculative and uncertain.

2.3.3 Pursuant to Clause 2.2.1 above, PFAs shall obtain sufficient

knowledge (number of units, terms of the sale/contract, and
monetary worth) of the instrument(s) intended to be exchanged
before taking investment decisions on Fund VI assets.

2.4 Allowable Instruments

2.4.1 The provisions of Section 4 of the Investment regulation shall apply
to Fund VI in respect of allowable instruments.

2.4.2 Pursuant to Clause 2.4.1 above, Fund VI assets shall be invested in

the following instruments:

Public
Operational Framework For Non-Interest Fund (Fund VI) Page 9 of 21
 i. Government Sukuk, (including Islamic Treasury Bills and
Euro Sukuk) issued by FGN, CBN or FGN Agencies and
Infrastructure Sukuk, backed by FGN/CBN guarantee)
ii. Corporate Sukuk (including Sharia’ah compliant ABS,MBS,
GDNs, Euro Sukuk & Infrastructures Sukuk)
iii. Supranational Sukuk
iv. Shari’ah compliant Money Market instruments
v. Shari’ah compliant ordinary shares (including GDRs)
vi. Shari’ah compliant infrastructure funds
vii. Shari’ah compliant private equity Funds
viii. Shari’ah compliant Open/Closed/Hybrid Funds
ix. Shari’ah compliant real Estate funds

2.4.3 Fund VI assets are also allowed to be invested in conventional

assets where a PFA is unable to find approved Non-Interest
instruments. The conventional assets are to be phased out as more
approved Non-Interest instruments become available.

2.4.4 The conventional assets must comply with the provisions of Section
2.1.2 of this Operational Framework.

2.4.5 The conventional securities to augment Sharia-compliant assets

could be interest bearing but should not be in sectors/business
whose underlying assets/products do not meet the basic ethical
principles as stated in Section 2.1.2 of this Operational Framework.

2.5 Quality of Instruments/Securities

2.5.1 The provisions of Sections 5 of the Investment Regulation shall
apply to Fund VI in respect of quality requirements for instruments
to be invested in the Fund.

Public
Operational Framework For Non-Interest Fund (Fund VI) Page 10 of 21
 2.5.2 The rating requirements with respect to selection of counter parties
and investment instruments in Fund VI shall be in line with the
provisions of Section 5.1 of the Investment Regulation.

2.6 Investment Limits

2.6.1 The provisions of Sections 4 and 5 of the Investment Regulation
shall apply to Fund VI in respect of investment limits and authorized
markets for trading.

2.6.2 Pursuant to Clause 2.6.1 above, the overall maximum investment

limits for Fund VI are as follows:
Table I: Maximum Investment Limits for Active Fund VI

ASSSET CLASSES GLOBAL LIMITS PER ISSUER LIMITS PER ISSUE LIMITS

S/N
1 Government Sukuk (including Islamic FGN & CBN i. FGN Bond: Not i. FGN Bond: Not
Treasury Bills and Eurobonds Sukuk: Maximum of Applicable Applicable
(including Sukuk) issued by FGN, CBN 70% ii. Maximum of 2.5% of
or FGN Agencies and Infrastructure ii) Maximum of 5% each issue of FGN
Sukuk,backed by FGN/CBN of pension fund Eurobond.
guarantee) assets in total
issues of FGN
Eurobond.

State and Local Based on the credit

Governments: Maximum of 5% of rating of the Sukuk
pension assets thus:
i. 15%, if Issue is under management i. Rating of BBB: 25%
backed by in total issues of any of the issue.
ISPOs/Guarante one State or Local ii. Rating of A: 30% of
es. Government. the issue
iii. Rating of AA &
ii. 3%, if issue is not above: 35% of the
backed by ISPOs/ issue
Guarantees.

2 Corporate Sukuk (including ABS, 40%, subject to a Maximum of 7.5% of Based on the credit
MBS, maximum of pension assets under rating of the Sukuk
GDNs, Eurosukuk & Infrastructure 20% in Infrastructure management in total thus:
Sukuk) Sukuk issues of any one i. Rating of BBB: 25%
corporate entity. of the issue
ii. Rating of A: 30% of
the issue

Public
Operational Framework For Non-Interest Fund (Fund VI) Page 11 of 21
 iii. Rating of AA &
above: 35% of the
issue

Eurosukuk

Maximum of 2.5% of
each Eurosukuk
issue

3 Supranational 20% Maximum of 5% of Based on the credit

Sukuk pension assets rating of the sukuk
under management thus:
in total issues of any
one Multilateral i. Rating of “BBB”:
Development Finance 20% of the issue
Organization. ii. Rating of “A”: 25%
of the issue
iii. Rating of “AA &
above”: 30% of the
issue
4 Shariah compliant Money 30% I.Maximum Applicable to
Market Instruments (including investment of pension Commercial Paper
Bankers Acceptances; Commercial assets in all money issues Only.
Papers of corporate entities) market instruments Based on the credit
issued by any one bank rating of the
shall be subject to the corporate entity
issuer’s credit rating issuing the
thus Commercial Paper
thus:
i. Rating of “BBB”: i. Rating of “BBB”:
3% of value of 16% of the issue
pension assets
ii. Rating of “A”: 20%
of the issue.
ii. Rating of “A”: 5%
of value of pension
iii. Rating of “AA &
assets
above”: 25% of issue
iii. Rating of “AA” &
above: 7.5% of
value of pension
assets.

II. For Commercial

Paper, maximum of
5% of value of
pension assets may
be invested in total
issues of any one
corporate entity
5 Shariah compliant Ordinary Shares 25% Maximum of 5% of Maximum of 7.5% of
(including GDRs) value of pension issued capital of any
assets in any one one eligible quoted
corporate entity. company.

GDR
Maximum of 5%
of the value of GDR
issued.

Public
Operational Framework For Non-Interest Fund (Fund VI) Page 12 of 21
6 Shariah compliant Infrastructure 5% Maximum of 5% of Maximum of 20% of
Funds value of pension the value of any one
assets to any one Fund
issuer.
7 Shariah Compliant Private Equity 5% Maximum of 5% of Maximum of 20% of
value of pension the value of any one
Funds
assets to any one Fund
issuer.
8 Shari’ah compliant Open/Closed- 20% Maximum of 5% of Maximum of 15% of
value of pension any one Fund
End/Hybrid Funds
assets to any one
(including ETFs& REITs) issuer.

Table II: Maximum Investment Limits for Retiree Fund VI

ASSSET CLASSES GLOBAL LIMITS PER ISSUER LIMITS PER ISSUE LIMITS

S/N
1 Government Sukuk (including Islamic FGN & CBN i. FGN Bond: Not iv. FGN
Treasury Bills and Eurobonds Sukuk: Maximum of Applicable Bond: Not
(including Sukuk) issued by FGN, CBN 80% Applicable
or FGN Agencies and Infrastructure ii) Maximum of 5% ii. Maximum of 2.5% of
Sukuk,backed by FGN/CBN of pension fund each issue of FGN
guarantee) assets in total Eurobond.
issues of FGN
Eurobond.

State and Local Based on the credit

Governments: Maximum of 7.5% of rating of the Sukuk
pension assets thus:
iii. 20%, if under management iv. Rating of BBB: 25%
Issue is backed in total issues of any of the issue.
by one State or Local v. Rating of A: 30% of
ISPOs/Guarante Government. the issue
es. vi. Rating of AA &
above: 35% of the
iv. 3%, if issue is not issue
backed by ISPOs/
Guarantees.
2 Corporate Sukuk (including ABS, 45%, subject to a Maximum of 5% of Based on the credit
MBS, maximum of pension assets under rating of the Sukuk
GDNs, Eurosukuk & Infrastructure 10% in Infrastructure management in total thus:
Sukuk) Sukuk issues of any one iv. Rating
corporate entity. of BBB: 25%
of the issue
v. Rating of A: 30% of
the issue

vi. Rating of AA &

above: 35% of the
issue

Public
Operational Framework For Non-Interest Fund (Fund VI) Page 13 of 21
 Eurosukuk

Maximum of 2.5% of
each Eurosukuk
issue

3 Supranational 20% Maximum of 5% of Based on the credit

Sukuk pension assets rating of the sukuk
under management thus:
in total issues of any
one Multilateral i. Rating of “BBB”:
Development Finance 20% of the issue
Organization. v. Rating of “A”: 25%
of the issue
vi. Rating of “AA &
above”: 30% of the
issue
4 Shariah compliant Money 35% I.Maximum Applicable to
Market Instruments (including investment of pension Commercial Paper
Bankers Acceptances; Commercial assets in all money issues Only.
Papers of corporate entities) market instruments Based on the credit
issued by any one bank rating of the
shall be subject to the corporate entity
issuer’s credit rating issuing the
thus Commercial Paper
thus:
i. Rating of “BBB”: i. Rating of “BBB”:
3% of value of 16% of the issue
pension assets
ii. Rating of “A”: 20%
of the issue.
iii. Rating of “A”: 5%
of value of pension
iii. Rating of “AA &
assets
above”: 25% of issue
iii. Rating of “AA” &
above: 7.5% of
value of pension
assets.

II. For Commercial

Paper, maximum of
5% of value of
pension assets may
be invested in total
issues of any one
corporate entity
5 Shariah compliant Ordinary Shares 5% Maximum of 2.5% of Maximum of 7.5% of
(including GDRs) value of pension issued capital of any
assets in any one one eligible quoted
corporate entity. company.

GDR
Maximum of 2.5%
of the value of GDR
issued.
6 Shariah compliant Infrastructure 0% Not Applicable Not Applicable
Funds

Public
Operational Framework For Non-Interest Fund (Fund VI) Page 14 of 21
7 Shariah Compliant Private Equity 0% Not Applicable Not Applicable
Funds
8 Shari’ah compliant Open/Closed- 5% Maximum of 5% of Maximum of 15% of
value of pension any one Fund
End/Hybrid Funds
assets to any one
(including ETFs& REITs) issuer.

2.7 Violation of Investment Limits

2.7.1 The provisions of Sections 6, 9, 10 and 11 of the Investment
Regulation shall apply to Fund VI in respect of violation of investment
limits, conflict of interest issues, performance benchmarks, and
performance reporting and voting rights.

2.7.2 Notwithstanding the provisions of Section 2.7.1 above, a moratorium

of 12 months from the commencement date (1st day of effective
implementation of Non-Interest) is provided for temporary violation
of the investments limits. PFAs are expected to rebalance their
portfolios within the 12 months moratorium period.

2.8 Eligibility
2.8.1 RSA holders in Fund I, Fund II and Fund III are eligible to move their
RSA contributions to Fund VI (Active Fund VI).

2.8.2 Retirees in Fund IV are eligible to move their RSA contributions to

Fund VI (Retiree Fund VI).

2.8.3 The Commission shall determine the participation of Micro Pension

Contributors in due course.

2.9 Custody of Non-Interest Fund

2.9.1 PFAs shall maintain the Pension Fund Custodian (PFC) that
manages the custody of the ‘Active’ RSA Funds (Fund I, II and III) to
administer the custodial services of the ‘Active’ and Retiree RSA
Fund VI.

Public
Operational Framework For Non-Interest Fund (Fund VI) Page 15 of 21
2.9.2 PFAs shall open the necessary custodial accounts for the Non-
Interest Fund (Active RSA Fund VI and Retiree Fund VI).

3.0 GOVERNANCE STRUCTURE OF FUND VI

3.1 Shari’ah Board of Advisers

3.1.1 The FRACE shall serve as an advisory body to the Commission on

Islamic Finance matters and specifically on all subsidiary legislations
on investment of Fund VI assets.

3.1.2 In line with the provision of paragraph 6.1 of the Guidelines on the
Governance of Financial Regulation Advisory Council of Experts for
Non-Interest (Islamic) Financial Institutions in Nigeria issued by the
Central Bank of Nigeria (CBN) and as contained in Section 3.1.1 of
this Operational Guideline, FRACE shall serve as the Shari’ah
Advisory Board of the Commission for the purpose of clarifications
on issues relating to Non-Interest Fund.

3.1.3 The Commission shall seek the advice of the FRACE on matters
relating to Islamic commercial jurisprudence. The advice of FRACE
in this regard shall be used by the Commission as an input into its
regulatory decisions on the management of Fund VI by PFAs.

3.1.4 There shall be a Committee of Resident Shari’ah Advisors

established for the Pension Industry to ensure continuous Shari’ah
audit and purification of the Investment Pool of Fund VI assets. The
Resident Shariah Advisors shall also be responsible for the
purification and disposal of Non-Permissible Income, where
investment was done in conventional non-Shariah-compliant
instruments or any accrued income that is non-permissible under
Shari'ah.

Public
Operational Framework For Non-Interest Fund (Fund VI) Page 16 of 21
4.0 COMMISSION AND FEES
4.1 Pursuant to clause 2.1.3 of this Framework, the Principle of Wakalah
Bil-istithmar shall apply to the fees charged by PFAs on Fund VI.
Consequently, Fund VI fees shall be charged as a percentage of the
Net Asset Value (NAV) of the investment of Fund VI assets.

4.2 The rate of fees to be charged in 4.1 above shall be as defined in

the Regulation on fees Structure and other relevant Circulars issued
by the Commission.

4.3 Pursuant to clause 2.1.4 of this Guideline, the principle of

Mudarabah shall apply to Retirees in Fund IV. Accordingly, income
based fees shall be charged for Retirees in Fund VI.

4.4 Administration fees shall be charged per RSA holder by PFAs, to

cover cost of registration and administering each RSA in line with the
provisions of the Regulation on Fees Structure issued by the
Commission.

5.0 PORTFOLIO COMPOSITION OF FUND VI

5.1 The Portfolio composition of Fund VI, in the first instance, shall be
made up of Sharia compliant instruments and subject to the
provision of Clause 2.4.3 of this Operational Guideline, any gap shall
be filled up with conventional securities/instruments.

5.2 Licensed PFAs shall in addition to other statutory returns render

monthly and quarterly reports to the Commission, providing
justifications for all Non-Shariah compliant securities in the Fund VI
portfolio.

5.3 The Portfolio Mix (compliant vs non-compliant) in Fund VI shall be

progressively phased out in favour of Shari’ah compliant securities

Public
Operational Framework For Non-Interest Fund (Fund VI) Page 17 of 21
 subject to market situation and availability of products. The
progressive phasing of investment in favour of Shari’ah-compliant
investment shall be reported quarterly to the FRACE by the
Commission for proper monitoring of compliance with Shari’ah
principles.

5.4 The Commission shall, pursuant to review of the market situation

and availability of products, determine the terminal date for
conventional assets in Fund VI, after which Fund VI shall fully
comprise of only certified Shari’ah compliant products.

6.0 TRANSFER MODALITIES

6.1 Eligible RSA holders seeking to move to Fund VI shall do so in

accordance with Section 7.5 of the Investment Regulation dealing
with active choices.

6.2 The provisions of the RSA Multi-fund Implementation Guidelines

shall apply to Fund VI in respect of cost of transfer, valuation,
movement of assets & types of asset, maintenance of proper books
of accounts, custody arrangements and movements from RSA
Funds I, II, III, and IV.

6.3 Notwithstanding the provisions of Section 7.5 of the Investment

Regulation and Section 2.2.5 of the RSA Multifund implementation
Guidelines, retirees under Fund IV can move their RSAs to Fund VI.

6.4 RSA holders in Fund VI seeking to move back to any of the Active
RSA Funds or Fund IV shall do so in line with the provisions of the
RSA Multi-fund Implementation Guidelines and Section 7.6 of the
Investment Regulation dealing with Transfers between Fund Types
within a PFA.

Public
Operational Framework For Non-Interest Fund (Fund VI) Page 18 of 21
6.5 The nominal unit price of Fund VI (RSA Fund VI and Retiree Fund
VI) shall be N1.000 at the 1st day of the effective implementation of
Non-Interest Fund.

6.6 PFAs shall redeem units from the RSA ‘Active’ Funds (Fund I, II and
III) and RSA Fund IV in respect of contributors and retirees who have
formally applied to move their contributions to Fund VI. The naira
value of the balance in their RSAs shall be transferred to purchase
units in the RSA Fund VI at the nominal unit price of N1.000.

7.0 CAPACITY BUILDING/TRAINING

7.1 All Operators shall develop and build the necessary competencies
to effectively manage Fund VI assets.

7.2 The Commission shall monitor compliance with 7.1 above.

7.3 The Commission shall ensure capacity building on Non-Interest

finance products and Islamic Finance within the pension industry.

7.4 The Commission shall, in order to provide a viable platform for

addressing emerging issues in Islamic finance (governance and
jurisprudence) as well as to discuss operational challenges, organise
periodic finance fora on Non-Interest Fund for the Pension Industry.

7.5 PFAs shall provide adequate financial advice and guidance to their
clients on the benefits and potential risks of transferring their RSAs
to Fund VI.

8.0 AUDIT, ACCOUNTING AND DISCLOSURE REQUIREMENTS

8.1 PFAs shall maintain detailed records in respect of their operations

on Fund VI in line with the provisions of Section 66 of the PRA, 2014
and requirements of the Fund Accounting Guidelines issued by the
Commission.

Public
Operational Framework For Non-Interest Fund (Fund VI) Page 19 of 21
8.2 All PFAs shall comply with the relevant standards on disclosure
issued by standard setting organisations including the following:

i. Financial Reporting Council of Nigeria (FRCN)

ii. Islamic Financial Services Board (IFSB) and
iii. Accounting and Auditing Organisation for Islamic Financial
Institutions (AAOIFI)

8.3 All PFAs shall comply with the Generally Accepted Accounting
Principles (GAAP) codified in local standards issued by the FRCN
and the International Financial Reporting Standards (IFRS). Where
transactions, products and activities are not covered by these
standards, the relevant provisions of the AAOIFI shall apply.

8.4 All PFAs shall comply with the requirements of provisions of the
Code of Corporate Governance for Licensed Pension Operators,
Regulations for Auditing of Pension Funds and applicable
guidelines/directives regarding the appointment, re-appointment,
resignation, rotation, change and removal of auditors.

8.5 PFAs shall provide monthly reports on the percentage split between
compliant and non-compliant investments in a format to be provided
by the Commission.

8.6 PFAs shall also maintain records that show all earnings, receipts,
payments and charges made to the Fund and render regular reports
to the Commission, as may be specified from time to time.

Public
Operational Framework For Non-Interest Fund (Fund VI) Page 20 of 21
9.0 REVIEW AND ENQUIRIES

9.1 This Framework shall be subject to review by the Commission from

time to time.

9.2 All enquiries regarding this Framework shall be directed to:

The Director General
National Pension Commission
174, Adetokunbo Ademola Crescent Wuse ll, Abuja- Nigeria
Email:[email protected]
Tel: +234-9460-3930

Public
Operational Framework For Non-Interest Fund (Fund VI) Page 21 of 21