IAS Staff Information Session 1

What is a key characteristic of a Universal Pension?

• Provides a minimum guaranteed level of income to all citizens past retirement age

• Pension payout depends on individual contributions and the investment performance

• Ensures that all retirees have an adequate level of income replacement

Which of the following can be considered a Universal Pension in the Maldives?

• Maldives Retirement Pension Scheme

• Old Age Basic Pension

• Proceeds from Government Provident Fund

What was the purpose behind the establishment of Maldives Retirement Pension Scheme?

• To assist members in saving for major life expenses

• To provide a pension payouts equivalent to Old Age Basic Pension

• To provide a financially sustainable retirement savings scheme for all employees in the formal sector, and to assist in lifecycle income smoothing

What is the investment objective of Maldives Retirement Pension Scheme?

• To deliver a 50% income replacement rate during retirement for all members who actively contribute for more than 40 years

• To invest in short term instruments so that the funds will be always accessible for payouts and withdrawals

• To provide means for members to aggressively pursue quick gains by investing in highly volatile and speculative assets

What is the main difference between saving and investing?

• Saving entails putting money away in cash products, investing involves buying assets that have the potential to provide additional growth or income

• Saving involves putting money in a savings account, investing involves doing business

• It is the same thing

Which the following scenarios are examples of investing?

• Becoming the Managing Director of a hotel company

• Buying shares of a company that owns and operates a resort

• Entering into a partnership to start a consulting firm

• Investing in a bond issued by a consulting firm

Which of the following best describes investable securities?

• Any financial asset that can be easily bought or sold in a public market, such as stocks and bonds

• Only those financial assets that are guaranteed to increase in value over time

• Financial assets that are kept as security when borrowing from banks

What are the benefits for a Pension Fund when investing within the capital market?

• Higher returns are guaranteed due to the involvement of government agencies

• Capital markets offer a more liquid and regulated environment, enhancing investment safety and stability

• Capital markets exclusively deal with high-risk investments and hence offer higher returns compared to other alternatives like private equity or real estate

One of the primary reasons a pension fund may prefer investing through securities over direct lending is because:

• They provide greater liquidity and ensures more predictable returns

• They minimize administrative overhead and operational complexity

• They can generate higher returns compared to direct lending

Why might pension funds be cautious about direct lending to companies despite potential higher returns?

• Direct lending offers very limited exit-strategies compared to their publicly traded counterparts

• Direct lending ensures fixed returns and guarantees against market downturns

• Investing in publicly traded securities provides immediate cash flow and low-risk investment options