Abstract:
This study focused on
the analysis of the impact of RBA guidelines on the return on investments of
both pension funds under management and those for pension schemes. A random sample of 175 fund
trustees and a census of 13 fund managers from registered fund management companies
participated in the survey. The questionnaire was administered through the d
rop
-
and
-
pick method.
Data
were
analyzed using SPSS (Statistical Package for Social Sciences) and summarized in
descriptive statistics
,
such as mean, standard deviation, frequencie
s, percentages, and t
-
tests for
mean differences were used.
The study
determined that
annual investment return for retirement
benefits schemes in the past three years ranged between 10
and
27.52%, sometimes falling below the
annual inflation. The Kenya pe
nsion funds are in complian
ce
with the prescribed broad guidelines
with regard to maximum percentages of total asset value
of fund by the RBA Act. They ar
e
,
however
,
moderately in compliance with the regulations requiring that that they maintain an actuari
al
solvency of 80% and above. The overall
weighted returns b
efore the implementation of RBA
Guidelines was low (average scale of 1.9) while the weighted returns after the implementation of
RBA Guidelines
was
high, at an average scale of 3.7. An analysis of
the trend
,
however
,
showed that
long
-
run performance has slowed down.
The h
ighest growth was realized for mortgage and cash
returns as opposed to rights issues and bonus shares. There is need to fashion out the appropriate
mix of reforms suitable for Keny
a that will ensure the long
-
run sustainability of its pension systems.
The challenge is for the country to adopt a unified, harmonized, and transparent regulatory
framework that will integrate the pension system in order to ensure sustainability in its fin
ancing
and mobilizing of adequ
ate funds to cater for the ever
-
increasing population of beneficiaries
in
this
regard, comprehensive pension reform policy with wider target radar and one that will consolidate
and harmonize the v
arious legislations touching o
n retirement benefits industry in line with
Retirement Benefits Act.
The Regulator needs to implement measures to ensure pension funds are
insulated from inflationary and other risks. An effective way is to institute a pension risk insurance
fund that wil
l underwrite and compensate such losses as will be prescribed. Further, there is need
for a systematic indexation of benefits to inflation. RBA
should
strengthen its compliance and
enforcement function in order to ensure that it appropriately deals with em
erging present and future
regulatory challenges.