RBA ready to soar at greater heights

By Evans Ongwae

The Retirement Benefits Authority (RBA) is celebrating 20 years of great achievements while also focusing on raising pension coverage in Kenya. The target is to hit 30 percent pension coverage of the labour force by 2024 from the current 22 percent.

RBA chief executive Nzomo Mutuku says the Authority is targeting to have more people in the informal sector join pension schemes. In its 2019-2024 strategic plan, RBA has outlined the strategies it will use to achieve this goal.

Over the last two decades, RBA, through its activities, has helped increase pension coverage from 12 percent to 22 percent of the labour force. Within this period, assets owned by the pension sector have grown from less than Ksh100 billion to Ksh1.33 trillion as at June this year.

Mr Mutuku says even the number of service providers has increased manifold over the 20 years. The industry now has 31 administrators, 24 fund managers, 11 custodians and more than 50 fully qualified actuaries.

Since RBA was established, the industry has witnessed some remarkable changes. The Authority has overseen the introduction of individual personal pension schemes for the self-employed and those in the informal sector; umbrella pension schemes for employers; post-retirement medical fund; use of pension funds in mortgages (initially, assigning 60 percent of pension funds to access mortgage and now, under a new Act, use of 40 percent of these funds to buy a house).

Additionally, the guidelines issued by RBA have aided industry players to operate under clear rules. These include good governance and treating customers fairly, and income draw-down. Before RBA issued the latter guideline, retirees could only take lump sum amounts or annuities.

When the Covid-19 pandemic hit the country, pension schemes, just like other sectors of the economy, experienced challenges. Employers shut down operations, retrenched staff or sent them on unpaid leave. The affected employees suspended their contributions to pension schemes. Investments by pension schemes were affected.

Mr Mutuku says strong risk management measures ensured that pension schemes sustained their operations.

The RBA CEO says the Authority had provided guidelines for schemes to diversify their investment portfolios as a way of managing risks. “We had given big schemes up to June 2020 and the smaller ones by June 2021 to comply with these guidelines,” says Mr Mutuku.

However, because of the challenges posed by the Covid-19 pandemic this year, RBA is dealing with each scheme’s compliance on a case-by-case basis.

Mr Mutuku says Kenya has a very good retirement benefits regulatory framework that provides a safe environment for saving for retirement. The checks and balances that ensure good governance in the industry support its growth. Trustees, custodians, fund managers, administrators and RBA, all have their roles, and the rules they must observe are clearly spelt out.

The RBA CEO says the reforms carried out in the industry have been positive and he cites the new mortgage regulations as a prime example. He expects many Kenyans who belong to retirement schemes to seize the opportunity and use their pension savings to buy homes. The proposed law allows pension scheme members to use up to 40 percent of their savings or Ksh7 million to buy residential houses.

Once this law is approved by the National Assembly, trustees will have one year to amend scheme regulations accordingly.

Mr Mutuku says the problem of some sponsors delaying to remit members’ pension contributions is being addressed. He points out that this is mostly with counties and the former local authorities, public universities, the sugar industry and the retail sector.

RBA recently published a special supplement on its 20th anniversary. For a more comprehensive picture of its progress in the last 20 years, kindly download a PDF copy of the supplement here.