Ethical option for pension funds

By | February 14, 2018

The reality is that we can’t be fresh forever, similarly, we can’t earn forever particularly if you are a salary earner. The older you become in the job, the sooner you might be let go off the job. Hence there is need to save for the rainy day. One of such savings for the rainy day is the pension scheme.

In Nigeria, the pension commission was established in the year 2004, for the effective management and administration of contributory pension by the employees and employers. The result shows that the regulations have achieved lots of successes in terms of safeguarding the funds of employees and ensuring that they have access to it as at when required after retirement.

As at April 2017 the total pension asset in Nigeria stands at about 6.5 trillion Naira, this is according to the pension commission. Most of the funds are invested in bonds, treasury bills, corporate debt securities, commercial papers and other money market instruments.

What this implies for an ethically minded person is that the contributors and owners of the funds are not given any opportunity to determine where and how their funds are invested. For those who are Muslims and are very particular about how their funds are invested, they are not given the opportunity to do so. Hence, they are forced to accumulate wealth in a way that is not aligned with their faith.

Currently, there are about 21 pension administrators in Nigeria, not even one of them provides an option to their customers (contributors) to choose where and how their funds can be invested. A closer look into a contributor’s account shows that over 40% of the current balance is the return on investment – this is good but the returns are from instruments that are not ethically aligned with the believes of the contributors.

However, is it out of place to ask for an option that will allow us to specify where and how our funds are invested? The answer is no! We should be given the opportunity. Now that we have ethically structured investments opportunities all around us such as Sukuk and other ethically-based money market instruments, the pension fund administrators do have an option to invest funds ethically, if the contributors desire so.

Our voice should be very loud and clear in this regard, this will send signals to the pension fund administrator to do the right thing and the first to implement such will have the advantage over others as there will be a massive exodus of ethically minded contributors migrating to their plan.

If you wish that your funds be ethically managed, click this link http://bit.ly/2GeFUvE to sign up and we shall ensure that this gets to the right authorities thus pressuring them to do the needful. However, our long-term goal should be a full-fledged PFA that only invest in ethical assets.

 

 

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2 thoughts on “Ethical option for pension funds

  1. Dipo Ehindero

    I agree with your position of the absence of choice in the present design of the Pension Scheme in Nigeria. How can i be partaking in something i do not believe in and will be satisfied? Thus the need to create options for ethical investing. That said, I think on a grander scale, the whole world has agreed to live in free market.I mean everyone , Muslims, Jews, Christians, Buddhist.. everyone because free market economic system is the only way to guarantee choice. The sole difference between communism ( as is the drift of the PFA and their overlord, PENCOM in Nigeria) IS the presence or absence of CHOICE. Choice guarantees that your voice will be heard loud and clear irrespective of what you believe. We must make sure we keep speaking about the power of choice until the authorities, PENCOM hears.
    However, as a personal deviation, in the light of Islamic finance, How does Islam view Free Markets? Does Islam guarantees Free Markets and its core component of choice? I like to know before I respond and say something else.

    Reply
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