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Six Things to Consider about the Non-Interest Fund

The Non-Interest Fund (Fund VI) is a product of the Multi-Fund structure established in 2008 to create investment portfolio choices for contributors and also improve the security of pension assets through ample portfolio diversification.

As an active retired savings account (RSA) holder, you may be interested in moving your contributions to the newly implemented Fund VI. And you need some clarity to enable you to make informed investment choices.


That is why this article shares with you the six primary things to consider when you are about to transfer to the Non-Interest Fund (Fund VI).


Non-interest funds are shariah-compliant funds


Shariah-compliant funds are investment funds governed by the requirements of Shariah law and the principles of the Islamic religion.


Shariah-compliant funds are considered to be a type of socially responsible investing. Socially responsible investing is an investment strategy that seeks to bring about social change and also yield financial returns for an investor. Socially responsible investing allows investors to invest in funds that are in line with their principles and values.


This means that your pension contributions will be invested in ethical business activities that enhance better individual or corporate behaviour.


Fund VI is based on the investment agency contract


Fund VI is based on the principles of investment agency contract (Wakalah Bil Istithmar). It is a system whereby Islamic financial institutions manage funds on behalf of their customers. This involves providing agency charges against specific fund management fees. The Pension Fund Administrator acts as the investment agent for active RSA contributors in Fund VI.


This means that your pension fund administrator will invest your pension fund assets in Shariah-compliant instruments such as Government Sukuk, Corporate Sukuk, Supranational Sukuk and some other Shariah-compliant money market instruments.


Fund VI adopts equity participation and the principle of profit and sharing


Non-interest funds are rooted in the model of profit-sharing (musharakah). Musharakah is a joint enterprise or partnership structure in Islamic finance in which partners share in the profits and losses of an enterprise.


Fund VI prohibits speculative transactions


Speculative transactions are sources of instability and by nature misallocation of capital. Non-interest funds are prohibited from carrying out such activities but instead focus on the deployment of capital to the real economy as a way of promoting socio-economic justice.


Non-Interest Fund (Fund IV) is divided into two


The Non-interest fund is divided into two namely; Active Non-Interest Fund and Retiree Non-Interest Fund. Pension Fund Administrators have been mandated to create and maintain both funds separately. The Active Non-Interest Fund is for contributors in Fund I, II and III that have chosen to move their contributions to Fund VI.


You can only move to Fund VI once a year


As an active contributor in Fund I to Fund III, you are eligible to switch to Fund VI only once within 12 months without paying any fees. If you request to switch to another fund within the same year, you will be required to pay a stipulated fee by PENCOM which is usually higher than the minimum value.


In closing, note that being an active retirement savings account (RSA) holder gives you the opportunity to move your contributions to the newly implemented Non-interest fund (Fund VI). Your RSA is money set aside from each paycheck and deposited with a Pension Fund Administrator (PFA) for a financially stable life in retirement. To save for retirement, open a Retirement Savings Account (RSA), and have 10% of your income go into your RSA. For more information on RSAs, contact Oak Pensions via www.oakpensions.com, info@oakpensions.com or call the Marketing Manager on 09087448661.






 

ABOUT THE AUTHOR:

Damilola Ayomide Agubata is a Content Writer with a background in digital journalism. A graduate of English from the University of Lagos, Damilola has driven engagement and visibility for different brands and organizations with a strong focus on SEO and Content Marketing. She currently works as a Content Associate for Detail and Avedia, a leading retail and media consulting firm.

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