Funds urged to enhance governance

Tuesday, November 10th, 2020 00:00 | By
Cash. Photo/File

Steve Umidha @UmidhaSteve

Pension fund trustees have failed to fulfil their stewardship roles despite pooling multi-billion shilling retirement assets over the last two decades.

Analysts reckon that a weak governance and fragmented system is the bane of the sector despite total pension assets surging from Sh80 billion in 2000 to over Sh1.3 trillion to date.

“There is a clear link between good governance and good scheme performance, but my biggest worry is that the guidelines could become a tick-box exercise and leave insufficient room for effective decision-making by trustees,” said Sandeep Raichura, the Chief executive of fund manager Zamara.

A box-ticking practice is an act of doing something just because there is a rule that says that you must do it.

“In the context of a pension fund, it is about achieving good outcomes for members of pension funds,” said Raichura during  a two-day Pension Trustees Seminar in Nairobi.

Kenya’s pension system is fragmented as currently set up, and lacks a harmonised policy, further, it operates on different Acts of Parliament.

As a result, experts said this has led to low coverage, unfunded liabilities, imprudent asset management, non-payment or delayed payment of pensions and weak enforcement of pension laws.

Despite its growth, therefore, current pension laws have established pension schemes largely for formal employees.

“The guidelines are intended to ensure that pension schemes are well anchored on robust governance principles and optimal investment strategies to ensure continued growth of the industry,”says Caroline Wanjala Manager of Supervision, Retirement Benefits Authority.

Revelations come on the heels of an October pledge by the US government to support the Kenya Pension Fund Investment Consortium (KEPFIC) “that presents an innovative approach to infrastructure investment in Kenya,” said US Ambassador to Kenya Kyle McCarter two weeks ago.

McCarter said the move was motivated by recent changes to the Retirement Benefits Authority guidelines allowing pension funds in Kenya to invest up to 10 per cent of their assets in infrastructure, potentially unlocking over Sh100 billion ($917 million).

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