Businesses & Financial News

Kenya’s pension industry projected to hit Sh1.5 Trillion by October

By Steve Umidha

Kenya’s retirement assets could hit Sh1.5 trillion by end of October 2021, up from Sh4.8trillion the industry held as at June this year, according to projections by the Retirement Benefits Authority (RBA).

KBA’s head of Research Shem Ouma recently revealed that the industry’s expected growth could play a key role in the overall capital markets growth – whose market capitalization grew by10.88 per cent to register Sh2.7 trillion in the year ended June 2021.

“As at end of June this year the industry had about Sh1.48 trillion in assets under management, and based on our internal projections, I see the industry hit Sh1.5 Trillion by end of October,” said Dr Ouma, adding that the unofficial estimates signal a potential growth despite the unveiling macro-economic challenges.

The new projections by the regulator come amid concerns expressed in April whose previous predictions had shown that the growth of pension assets would remain depressed this year, due to the embryonic shocks from the pandemic.

Pension assets under management grew by 5.8 per cent last year to reach Sh1.4 trillion despite the impact of COVID-19 pandemic.

The industry held Sh1.3 trillion in 2019 which was however, slower than the 7.8 per cent expansion rate achieved previously from fund managers and approved issuers who held the majority of assets at Sh1.29 trillion during the year including Sh209.8 billion held by the National Social Security Fund (NSSF).

In recent months, a certain calm has returned to financial markets, including the pension industry, presumably driven by optimism around an economic recovery – as lockdowns and movement restrictions ended across major parts of the country.

While there have been improvements in the sector amid the pandemic, many industry experts such as the Association of Pension Trustees and Administrators of Kenya (APTAK) are surprised by the growing reluctance from Kenyans to subscribe to annuity covers, considering positive economic projections and expectations in the sector.

“The only solution to this is the ongoing push to a universal social security coverage or social protection to Kenyans which essentially should also cater for those out of employment,” commented APTAK’s current president Hosea Kili during the association’s formal launch since its retitling to integrate trustees.

Efforts by the government to increase the mandatory pension contribution by workers in order to eliminate old age poverty continue to divide policy makers despite mounting pressure by sector players.

Statistics show that less than 10 per cent of Kenyan population retire financially independent with one of the reasons being cited for the sorry state being that when saving for retirement, most people underestimate how much they will have to pay for medical expenses during their retirement years.

Association of Kenya Insurers (AKI) says that the majority of the respondents to the association’s Kenya Retirement Preparedness Survey 2019 confirmed that they were not ready for retirement – with only 29 per cent feeling they are well prepared for retirement.

Other reasons for low preparedness are low income, lack of saving discipline, lack of financial literacy and investment ideas or options.

It is now feared that the situation could worsen in the years ahead owing to Kenya’s life expectancy rate which has been increasing consistently since 2015, an indicator that the number of retirees in the country is on the rise.

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