Workers’ retirement savings have grown at the slowest pace in five years due to the ravages of Covid-19 that affected contributions and sparked withdrawals.
The Retirement Benefits Authority (RBA) brief for up to last December shows assets under management expanded by 7.7 per cent to Sh1.39 trillion from Sh1.298 trillion in 2019.
The growth is down compared to 11.3 per cent a year earlier and is the slowest since 2015 when retirement benefits grew by 3.3 per cent.
Authority chief executive Nzomo Mutuku said last year saw many workers who lost their jobs tap into their savings to make ends meet, contributing to the slowed growth in assets.
“It was a difficult year. We had companies closing down, retrenched staff who were taking money from the system and some companies suspending contributions,” Mr Mutuku said.
The regulator had relaxed several terms last year, including allowing distressed firms in sectors like aviation, manufacturing and hospitality to suspend retirement contributions.
Covid-19-induced economic downturn saw some 1.72 million workers lose jobs in three months to last June as firms reacted to a sharp fall in revenues through layoffs and salary cuts.
Between April and September, about 44 schemes had suspended their pension contributions following the outbreak of the infectious disease, with RBA projecting Sh2.2 billion to be lost.
Mr Mutuku says many of these schemes in sectors such as education and hospitality had resumed contributions in the first quarter of this year on gradual economic recovery.
The third wave
However, Mr Mutuku cautioned that the fresh containment measures introduced to stem the spread of the third wave of coronavirus look set to erode this progress.
“With the new lockdown, we have to give it time to see how it will evolve,” Mr Mutuku said.
The RBA brief said the slowed growth in assets was also attributed to adverse effects of the Covid-19 pandemic on returns in financial markets, especially in the first half of the year.