THE Solomon Islands National Provident Fund (SINPF) has awarded its members with another handsome interest.
Minister of Finance and Treasury Rick Hou at the advice of the NPF board announced a 15 percent interest to be awarded to members for this financial year.
NPF normally announces the crediting interest rate awarded to members at the end of each financial year – which normally falls on June 30.
Mr Hou said the 15 percent interest was awarded based on the fund’s expected financial performance for the 2014 financial year.
“The 15 percent interest will be credited to members’ balances as of July 1.”
He said the Special Death Benefit will remain at $10,000.
According to figures released, the crediting rate of 15 percent is equivalent to more than $232million in interest to be credited to members’ contribution balances.
This according to the figures will expand members’ total contribution balance with the fund from $1.8 billion to more than $2.032 billion.
While congratulating the NPF management and board for the achievement, the Finance Minister assured them of the ministry and the Government’s commitment to defend the independence of the fund as the government recognizes the importance of the fund to the stability of the financial system and the economy.
“Let me say that the reform of the SINPF Act is absolutely necessary. The government has included this as part of its reform priorities.
“Already Cabinet has given endorsement for drafting instructions which are at an advanced stage.
“It is expected the new legislation will be tabled before Parliament in early 2015.”
He said this will bring SINPF in line with international standards but with provisions that will suit local environment.
He added that the new Act will place the Central Bank of Solomon Islands to regulate and supervise the fund, improving governance and transparency of the fund’s administration and operations.
The number of members with credited balances this year stands at 116,873.
Chairman of the SINPF board Baoro Laxton Koraua said the total estimated balance of all the contributions recorded in individual accounts is worth $1.8 billion, before yesterday’s crediting.
“This is up from $1.7 billion in June 2013, an increase of $109 million fueled by your new contributions and the impact of the previous 2013 year crediting rate of 20% of more than $246 million that was added to your contributions at the end of 30th June 2013.
“This is a challenge that my board and future boards will have, as the value of member contributions grow, NPF must continue to invest to ensure adequate positive returns continue to grow each year to cover for operating costs and distribution to members.
“It is pleasing to note that total interest earned on your contributions of $232 million is higher than total net contributions received during the year of $113 million, after deducting for member withdrawals of$114million.
“This $114 million is now circulating in the economy by those withdrawing members.”
The chairman added that the strong growth will continue to be fueled by members’ contributions paid in on their behalf by their employers and the effect of compounding interest credited annually to member’s account over their membership term with the Fund.
Mr Koraua said the Fund’s investment performance has another good year with an expected return of around $140 million with upsides that this can be more, once books are audited and signed off after 30 June 2014.
“While last year’s income performance was $840 million, that performance was driven by the revaluation of our two cash cow equity investments, SPOL and Telekom.
“Your Fund’s Investments portfolio has grown and reached $2.5 billion at the end of May 2014, and there are still possible upsides to take place by the end of June, 2014.
“In the last two years, investments have grown by $1.07 billion primarily driven by the growth in value of our two key equity investments, South Pacific Oil and Solomon Telekom.
“Now that the 2014 crediting rate of 15% is publicly announced, a positive rate above inflation by 12.0% at the end of June, 2014 (inflation around 5%), I would like to briefly present to you information on the level of your contributions, performance of your investment and it’s growth, challenges, and prospects for next year.” (see other related stories).
By EDNAL PALMER