TAP focusses on prudent investments

|     James Kon     |

THE investment activities of the Employees Trust Fund (TAP) are based on prudent measures that prioritise protecting capital and maintaining liquidity as well as ensuring stable returns that are higher than inflation rates in the long term.

TAP has several investments in Sukuk (Islamic bonds), bonds, money market instruments and equities in regional and global markets. Therefore, the performance of TAP depends on the global investment condition.

The average rate of dividend for TAP since its establishment 25 years ago is 2.5 per cent.

YB Pehin Datu Lailaraja Major General (Rtd) Dato Paduka Seri Haji Awang Halbi bin Haji Mohd Yussof, Minister of Defence II, said this during the 14th Legislative Council session yesterday morning.

The minister, who is also Chairman of TAP Board of Directors, was responding to questions raised by Legislative Council (LegCo) member YB Iswandy bin Ahmad.

He added, “Before the global financial crisis in 2008 to 2009, the rate of returns for TAP was very good at 4.25 per cent for four consecutive years. TAP’s investments are not exempted from market performance fluctuations or volatilities as well as from other investment risks.”

YB Pehin Datu Lailaraja Major General (Rtd) Dato Paduka Seri Haji Awang Halbi bin Haji Mohd Yussof, Minister of Defence II. – INFFOTO

For example, he said, in 2008 to 2009, the world stock market plummeted to negative 50 per cent.

However, the savings of TAP members were not affected as the trust fund’s investment strategies had taken into account all the risks.

YB Pehin Datu Lailaraja Major General (Rtd) Dato Paduka Seri Haji Awang Halbi said that in 2008, reserves were established as preparations for any drop in the market.

These reserves are able to drive consistent and stable returns for TAP members; during good market conditions, part of the returns are kept to offset a decline in market returns.

TAP’s financial performance can be accessed at www.tap.com.bn beginning from the financial year 2016/2017.

The financial report complied with international financial reporting standard as required by the Ministry of Finance (MoF) to ensure transparency of the activities and management of TAP as well as the Supplemental Contributory Pension (SCP).

In comparing the retirement schemes with the neighbouring countries, the minister noted that they are contributing significantly higher rates than TAP.

In one country, the contribution for its retirement scheme is 17 per cent from employer and 20 per cent from employee. In another, the contribution is 13 per cent from employer and 11 per cent from employee.

The TAP contribution rate is at five per cent from employer and five per cent from employee.

For SCP, it is 3.5 per cent from employer and 3.5 per cent from employee.

Furthermore, some countries have their own stock exchanges that allow funds from their retirement schemes to invest in local equities and bond markets without having to leave the country, thus avoiding the risk of exposure to currency exchanges.

The minister said, “The Ministry of Finance and TAP have frequently carried out studies through holistic approaches on the structures and strategies of investments. Studies were done taking into account the comparative studies of retirement schemes in neighbouring countries.

“For example in 2006, TAP made use of the services of Universiti Brunei Darussalam (UBD) to look into the long term capability of the trust fund.”

The SCP was established as an addition to TAP as a result of a study carried out by the MoF and the trust fund.

Through SCP, the government pays $30 per month as catch up for SCP members who have been TAP members since 1993 or members aged 25.

The minister revealed that the government had spent $283.48 million for the catch up payments in SCP.

For those who earn a salary of less than $500 per month, the government would top up the accounts of SCP members every month to make up the monthly contribution.

Meanwhile in 2012, to help TAP members own a house, the government introduced the TAP Housing Fund Scheme where the government provides a maximum cash assistance of $25,000 to members of TAP according to criteria.

So far, the government has provided cash assistance of $6.5 million.

On another note, YB Pehin Datu Lailaraja Major General (Rtd) Dato Paduka Seri Haji Awang Halbi said that the main purpose of the SCP scheme is to ensure all its members who have met the stipulated conditions will receive a minimum monthly annuity of $150 upon reaching the age of 60.

He was responding to a question by LegCo member and Penghulu of Mukim Telisai YB Haji Ramli bin Haji Lahit on the withdrawal of a minimum $150 per month from SCP scheme upon reaching the age 60.

In this regard, the minister said that the requirement set for receiving $150 per month is to contribute to the TAP scheme for not less than 35 years.

If the above requirements are not met then the monthly annuity amount is subject to the amount of savings accumulated in the member’s account, with a threshold amounting to a monthly payment of $12,000 which is a minimum payment of $50 per month for a period of 20 years.

The minister added, “If this amount is added with the pension allowance of $250 per month, the member will receive $300 per month. Therefore with this threshold, the lowest total annuity payment is $50 per month instead of $40.”

He believes that the MoF and TAP will continue to undertake studies to identify initiatives that will further enhance the scheme.