RBA targets Sh2.4 trillion asset base by 2024 with new Strategic Plan
The Retirement Benefits Authority (RBA) has launched a new Strategic Plan 2019 -2024 that will steer the pension body to new heights.
Among the key targets that the new strategic plan seeks to deliver is the realization of 30% pension coverage among Kenyans and an asset base of sh2.4 trillion by 2024.
“I am delighted that the plan focuses to grow this coverage where most of our workers are, the informal sector, almost all of whom are not covered by existing pension arrangements,” said National Treasury Cabinet Secretary, Henry Rotich during the official launch of the plan in Nairobi.
“I am sure that when we get pension penetration in this sector right, we will definitely achieve a higher pension coverage beyond the 30 per cent. I challenge all stakeholders , to do whatever it takes to realize the promise to our citizens of ensuring a high quality of life for all,” urged Mr. Rotich.
The Cabinet Secretary said the retirement benefits sector has a distinct role to play in the economy and particularly in the financial sector, which is aligned with the country’s long-term development blue print,Vision 2030.
Today, said Mr. Rotich, the retirement benefits sector commands an industry asset base of Kshs. 1.2 Trillion, nearly 14 percent of our GDP and it is growing. These resources are poised to contribute significantly towards financing the ‘Big Four” development initiatives, which aim to raise the share of manufacturing sector to 15 per cent of GDP; ensure all citizens enjoy food and nutrition security; work towards achieving universal health coverage and provide affordable housing. This is achievable through deepened financial markets to which pension funds contribute significantly.
Mr. Rotich said the Government will continue to implement reforms needed to facilitate ther growth of the pensions industry as well as its contribution to the Big 4 Agenda. In this regard, we are currently considering a review of the investment guidelines under the Retirement Benefits Act with a view to better facilitating investment in housing and infrastructure through private public partnerships.
“Further I will soon be launching the Kenya Mortgage Refinance Company, an institution which will in time issue long dated bonds which will be an attractive investment for the pension industry while allowing them to contribute to assisting Kenyans purchase affordable homes,” said Mr. Rotich.
Mr. Rotich said the National Treasury will censure state corporations that fail to remit pension deductions to their pension schemes in a timely manner. “It is for this reason that through the Finance Bill 2018, I introduced penalties and other sanctions against employers who fail to remit contributions on time. In the ongoing budget approval process for state corporations, The National Treasury shall require the corporations to give top priority to any pension contribution arrears,” warned Mr. Rotich.
For our own workers, added Mr. Rotich, the civil servants, the Government is committed to commencing the contributory Public Sector Superannuation Scheme. With the ballooning pension expenditure, this is a critical reform that is the only way to ensure sustainability of pension provision to civil servants in the long run. The on-going payroll cleanup through the Huduma Centres is expected to remove a large number of “ghost pensioners” from payroll.
The National Treasury is also finalizing the National Retirement Benefits Policy. This policy will finally bring a harmonized framework for pension provision across the public and private sectors in order to ensure that Kenya’s pension system remains inclusive, adequate, affordable and sustainable. I will be forwarding the draft National Retirement Benefits Policy to the Cabinet for consideration in the coming weeks,” said Mr. Rotich.
“As RBA we are committed to promote savings for retirement in Kenya through safeguarding, supervising and facilitating the development of the retirement benefits sector. This new strategic plan will help us create an inclusive, secure and growing retirement benefits sector, “said Nzomo Mutuku, Chief Executive Officer, Retirement Benefits Authority.
According Nzomo the pension industry in Kenya is worth KSh1.2 trillion in terms of assets under management but only 20 per cent of Kenyan workers are enrolled to a pension scheme.
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Nzomo added that “These statistics are worrying and that’s why as an organization we have to strategize our operations so as to ensure we build an authority that will strive towards ensuring Kenyans retire with dignity and this can only be done when we have more Kenyans enrolling on a pension scheme. This 2019-2024 plan is also aligned with the government’s broad development agenda as expressed in the Vision 2030, MTP III and the “Big 4 Agenda.”
The RBA new strategic plan is anchored in three strategic themes which are transparency and accountability, integrity, and innovation.
“We shall achieve the above by ensuring that our work Policy and Regulatory Framework is geared towards increasing confidence in the retirement benefits sector.
This will be accomplished by enhancing the capacity for policy formulation, improving the legal framework that guides the Authority’s operations, and strengthening surveillance of the sector in order to improve sector governance,” comments Nzomo.
He further acknowledges that the main reasons for the low uptake of pension among Kenyans is that the pension services are designed for workers in the formal workplace who are less than 20 percent of the working population.
“ We must take into consideration that 80 percent of Kenyan employees work in the informal sector where they lack proper channels for contributing to retirement schemes,”explained Mr. Mutuku.
By enhancing Pension Coverage in the Informal Sector, added Mr. Mutuku, we shall be reaching out to those Kenyans who are outside the pension scheme. This will be realized by enhancing need-based outreach programmes, promoting the development of pension products that specifically target the informal sector.
The implementation of this new strategic plan will cost RBA Sh 1.5 billion. This will be majorly funded by projected levy collections and other income.
Funds collected by pension firms are usually invested in diverse asset classes like government bonds, equities, real estate, offshore investments, and PE funds.
Most pension funds have started venturing into new asset classes such as offshore investments and Private Equity funds in an attempt to earn higher returns from their investments.
The Regulator is currently working on a framework for the schemes to take part in Public-Private Partnerships to help with the many infrastructural development projects in the country.