Kenya’s pension regulator, RBA, celebrates 20 years

RBA CEO Nzomo Mutuku says no Kenyan should be left out

The Retirement Benefits Authority (RBA) is celebrating 20 years at a time when Kenya’s Pension Industry growth is on an upward trajectory with pension assets hitting Kshs 1.4trn as at December 2020 up from less than sh100bn two decades ago.

According to RBA CEO Nzomo Mutuku, the Authority’s target is to grow assets to Kshs 2.4trn and expand pension coverage to 30 per cent of the labour force by 2024 from the current 22 per cent and 10 percent in 2000.

“When the Covid-19 pandemic hit the country, says Mr. Mutuku, “pension schemes, just like other sectors of the economy, experienced challenges. Employers shut down operations, retrenched staff or sent them on unpaid leave. Some employers, though still operating, were forced to temporarily suspend their contributions to pension schemes.

 Investments by retirement benefits schemes were affected due to the high volatility in the capital markets.  Meetings such as scheme Annual General Meetings had to be postponed or shifted to online channels.”

RBA implements risk-management system

The CEO says it is through the Authority’s implementation of strong risk management measures that ensured schemes sustained their operations and the impacts were minimised.

“We are now confident that as the pandemic eases the industry will bounce back stronger than before and allow the affected pension scheme members to continue growing their kitties,”he adds.

Mr. Mutuku says one key lesson that Kenyans must never forget from the covid-19 pandemic is the need to prepare for emergencies and retirement, since no one knows when their income can be cut off.  When Covid-19 struck and some workers found themselves suddenly retrenched, those who had earlier been saving for retirement had a critical cushion that they could count on.  Those who had not been saving were in a truly desperate situation.

RBA: Anyone earning an income can save for retirement

Whether formally employed or self-employed, anyone earning an income can join a pension scheme and start saving towards their retirement.

The Authority has licensed over 35 individual pension plans to cater for the self-employed and workers whose employers have not established pension schemes.

Specifically, the Authority is targeting to have more people in the informal sector join pension schemes. In our 2019-2024 strategic plan, we have outlined the strategies we will use to achieve this goal and the key entails design of products suitable for the informal sector and leveraging on technology to make them accessible to all Kenyans.

Also read: Join an Individual Pension Scheme and secure your retirement

Also read: Pension Schemes: Is your Money safe?

Already individual pension schemes have rolled out products that allow seamless saving through mobile phones with flexible entry and exit for members to fit lifestyle and taste of informal sector entrepreneurs and workers.

Pension industry service providers

Over the two decades of RBA’s existence, the number of pension industry service providers has increased. The industry now has 31 administrators, 24 fund managers, 11 custodians and more than 50 fully qualified actuaries.

Some of the remarkable changes the Authority has overseen across the 20 years include introduction of individual pension schemes for the self-employed and those in the informal sector; umbrella pension schemes for employers; post-retirement medical fund to cater for medical needs after retirement; income drawdowns (before this retirees could only take lump sum amounts or annuities) and use of pension funds in mortgages (initially, assigning 60 percent of pension funds to access mortgage and now use of 40 percent of these funds to directly  buy a house).

Separation of powers for accountability

Additionally, the guidelines issued by RBA have aided industry players to operate under clear rules. These include: good governance, treating customers fairly, scheme expenses, income draw-down and post retirement medical fund guidelines.

I want to assure the public that 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.

You can purchase residential house using pension savings

The reforms we have carried out in the industry over the two decades have been positive with the latest being the rules on mortgages that now allows pension scheme members to use up to 40 percent or Kshs 7.0 million of their pension savings to purchase a residential house.

With enactment of this amendment and the regulations, pension schemes – through their trustees – have until September 2021 to amend scheme documentation accordingly to facilitate members enjoy this benefit.

Also read: How to Buy Residential House using pension savings

We expect many Kenyans who belong to retirement schemes to seize the opportunity and use their pension savings to buy homes as part of securing a comfortable life in retirement.  

With the secure regulatory framework under the 20 year old RBA, the introduction of new schemes easily accessible to the informal sector, the tax incentives given by the Government for saving through retirement benefits schemes, great value additions such as post-retirement medical and mortgage access and learning from the lessons of the Covid-19 pandemic there is no reason why any Kenyan should not be saving for retirement.

Anyone can also file a complaint at the RBA portal for redress.