The National Pension Commission (Pencom) has introduced a Non-Interest Fund (Fund VI) and issued an Operational Framework for the Fund.
This is in furtherance of the implementation of the Multi-Fund Investment Structure, which seeks to provide investment portfolio choices to pension contributors and retirees. The Non-Interest Fund is a fund that complies with the provisions of Islamic Commercial Jurisprudence and any other established non-interest principles, as approved by the Financial Regulation Advisory Council of Experts (FRACE). The FRACE, has certified that the Operational Framework issued by the Commission complies with non-interest (Shari’ah) finance principles. The Non-Interest Fund offers a viable alternative to the conventional interest-based financial instruments for pension fund investment.
Below are 4 Important Things to Note about Investment in Non-Interest Fund (Fund VI)
No to Alcohol, Weaponry etc
Fund VI assets shall not be invested in the production or trading of alcohol, weaponry, interest-earning ventures, and other ventures of similar nature contrary to Sharia principles and as may be determined by Financial Regulation Advisory Council of Experts (FRACE) or any other body constituted by the Central Bank of Nigeria (CBN) and the Securities and Exchange Commission (SEC), from time to time.
Complies with Principles of Wakala Bil-Istithmar
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 Fund VI.
Complies with Principles of Mudarabah Contract
The principle of Mudarabah contract (profit-sharing and loss-bearing partnership) shall be used for retirees in Fund IV who opt for Fund VI.
No Speculation and Uncertainty
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.
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