Pension sector set for strong growth as economy recovers

Tuesday, June 28th, 2022 08:20 | By
Pension fund. Photo/Courtesy

Kenya’s pension market expects another year of growth, according to industry experts, basing the projection for the period on the impressive 2021 sector figures.

Last year, the retirement benefits schemes, which have been on a mend since the advent of Covid-19, gained 11.6 per cent compared to 7 per cent recorded a year earlier on the back of economic recovery.

Such headway, Hosea Kili, managing director of CPF Group, said offers an encouraging springboard for what industry players should expect by year-end. The pandemic, he added, was the ultimate blow to almost every economic sector worldwide.

“Nevertheless, the global economy is gradually recovering, markets are starting to soar, and overall, we had a good year ourselves. And we now believe this is a reflection of what the industry should expect by the end of 2022,” said Kili.

Kili made remarks during the group’s 19th annual general meeting (AGM) where he announced a growth of Sh68.24 billion worth of assets under management by three pension schemes managed by CPF Financial Services. Valued at Sh31.3 billion as of December 2020, the fund would be worth around Sh100 billion were it not for the amounting debts, Kili said, a big chunk of which, he added, is owed by county governments.

County Pension Fund posted a fund value of Sh27.97 billion last year up from Sh19.49 in 2020, a growth of 43 per cent while the net fund value position for the year ended December 2021 for Salih, a segregated fund within the CPF, stood at Sh3.28 billion up from Sh2.3 billion in the previous year.

Pension plan

In addition, CPF individual pension plan registered an increase in net assets to close the year at Sh5.19 billion from Sh3.52 billion the year before.

The growth, however, comes on the backdrop of worrying statistics by the Kenya National Bureau of Statistics (KNBS) in the FinAccess Household Survey Report 2021 which show that only 12 per cent of the adult population in the labour force save for their retirement in retirement benefits schemes. This, the data shows points to the low uptake of retirement benefits schemes’ services in the country.

Segregated retirement schemes, for instance, according to Cytonn Investments, have delivered a five-year average return of 11.7 per cent yearly for their members, which is above the 2021 average inflation rate of 6.1 per cent.

This also compares with returns from other savings platforms like bank deposits of 7.7 per cent during the same period.

“As such, we believe that more people in their working years should save for retirement in retirement benefits schemes in order to secure their income post-retirement and enjoy the real positive returns on offer,” the firm pointed out.

As of June 2021, industry data shows that assets under management rose by 11.8 per cent to Sh1.5 trillion from Sh1.3 trillion in June 2020.

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