The pension industry in Kenya is worth KSh1.2 trillion in terms of assets under management. In an interview with Kenyan Wallstreet, Retirement Benefits Authority (RBA) CEO Nzomo Mutuku said that despite the huge amount of collections, only 20 percent of Kenyan workers are enrolled to a pension scheme.
One of the main reasons for the low uptake is that pension services are designed for workers in the formal workplace who are less than 20 percent of the working population.
More than 80 percent of Kenyan employees work in the informal sector where they lack proper channels for contributing to retirement schemes.
The other hurdle is that most Kenyans, especially in rural areas lack knowledge about saving for retirement. In an effort to increase awareness, the Retirement Benefits Authority regularly conducts educational tours throughout the country.
Asset Allocation
Funds collected by pension firms are usually invested in diverse asset classes like government bonds, equities, real estate, offshore investments, and PE funds. RBA regulates the investment activities by pension schemes in order to safeguard workers’ contributions.
Mr. Nzomo Mutuku says that Pension Schemes present quarterly reports on their investments to the Retirements Benefits Authority.
The RBA boss noted that pension funds have started venturing into new asset classes such as offshore investments and Private Equity funds in an attempt to earn higher returns from their investments.
The pension’s regulator said that they are working on a framework for the schemes to take part in Public-Private Partnerships to help with the many infrastructural development projects in the country.
On the issue of unremitted contributions, Mr. Nzomo praised the new Finance law enacted in 2018 that gave RBA powers to go after employers who fail to remit their workers’ pension contributions. The executive noted that Universities and some retail businesses were the major culprits in the non-remittance matter.