CPF: Pension spending to surpass 2021 performance

By Steve Umidha

Kenya’s pensions spending is expected to accelerate this year based on industry projections and could exceed last year’s record expenses when sector spending grew by 26percent in the year to June 2021.

Pension payments hit Sh110.27 billion for the whole year to June 30, up from Sh86.99 billion the industry recorded a year earlier – the fastest annual growth in four years since June 2018, according to figures by the Controller of Budget.

But experts now believe 2022 could surpass last year’s spending as more public servants continue to exit the service in what has been a consistent trend in the last four years.

Interestingly, the Chief executive of County Pension Fund (CPF) Hosea Kili for instance, believes that this year’s pension spending, will coincide with a likely overall pension market growth that will be triggered by a stable macroeconomic environment as well as political stability, while the roll-out of the contributory Public Service Superannuation Scheme (PSSS) in January last year also expected to play a key role.

“We are looking forward to a ramp up in spending, political stability as well as a stable macroeconomic environment.

Even though downside risks could emanate from a slowdown in global growth such as the current global inflationary pressures, the pension industry is primed to capitalize on the gains amid a changing environment and growth in member contributions,” commented the Chief executive of County Pension Fund (CPF) Hosea Kili.

He was speaking yesterday when CPF Group was feted top of the medium taxpayers’ category in Kenya by the Kenya Revenue Authority (KRA).

Kenya’s pensions sector which had $12.97 billion in assets under management as of June 2021, could actually do well this year despite the upcoming August 2022 general elections, according to Kili with pension schemes playing a key role in unlocking financial source of cash for public infrastructural projects such as roads.

Pension spending is defined as all cash expenditures – including lump-sum payments on old-age and survivors pensions.

Such benefits provide an income for persons retired from the labor market or guarantee incomes when a person has reached a ‘standard’ pensionable age presently capped at 60 years old or has fulfilled the necessary contributory requirements.

Industry figures show that the Kenyan pension fund sector is the biggest in the region with over Sh1.4 trillion worth of savings invested in various asset classes but lack of diversification among trustees and lack of retirement security plans among Kenyans have seen the sector record ‘just enough’ growth despite its potential.

“Unless Kenya prepares for the challenge, a retirement calamity of immense proportions could happen sooner rather than later,” said the Chief executive of Zamara Actuaries, Administrators & Consultants who last month questioned the delayed process by authorities in implementing the National Social Security Fund Act of 2013 whose execution was expected to provide an obligatory superannuation pension plan for all salaried Kenyans.

It was also expected to address some of the challenges facing the sector today.

The Nssf no 45 Act of 2013 was assented to by President Uhuru Kenyatta on December, 24 2013 and came into force on January 10, the following year but its implementation has been overlooked.

“The NSSF Act of 2013 is in the national interest of our country…because what it does is it brings a compulsory pension for everybody who is earning a salary, it makes savings at a sensible rate.

For whatever reasons stakeholders went to court and blocked its implementation, I feel it is sad a solution hasn’t been found to date,” noted Raichura.

The Act provided the contribution at the rate of 6 percent and was to be phased over a period of five years. It establishes that the National Social Security Fund provides Social Security for Workers and Self Employed Persons and their dependents.