BY LORETTA BRIGIDIA MANELE
THE Solomon Islands National Provident Fund (SINPF) recorded an operating profit of $234.6 million by the end of December 2018.
This was expressed in Central Bank of Solomon Islands (CBSI) Financial Stability Report 2018.
CBSI said the outcome was underpinned by income earned on unrealized gains from unlisted equities, dividend income from shares, rents from rental properties, and interest on loans.
Moreover, the trend of the Fund’s profitability was said to be fluctuating due to the movements in the unrealized gains /losses.
CBSI said despite the uncertainty in the movement of the value of unlisted equities, the Fund continued to make positive profit in the financial year.
This saw a return on investment having increased to 10.8 percent; higher than the return recorded in 2017.
CBSI said the Fund’s general reserves also increased by 25 percent to $305.84 million.
The general reserves account as mentioned is one of the important accounts of the Fund given its direct linkage to the Special Death Benefit (SDB) scheme of the Fund.
Because of the amendment to the SINPF Act in 2018, SDB premium increased from $5 to $30 from each member per year.
CBSI said increase in the premium deduction will see increase in overall funds for the SDB scheme however there is no guarantee that this increase is sufficient enough to meet the demand for SDB given the fixed supply of SDB premium and the uncertainties associated with the demand for SDB.
“This demand-supply mismatch will make the Fund vulnerable to liquidity risk in the future,” said the report.
CBSI further stressed that in 2018, demand for claims on SDB outstripped the supply of deductibles and the excess demands are being matched with drawdowns from the general reserves account which is a risky practice going forward.