Individual pensions attract 144,640 members

Money Markets

A jua kali artisan at Kibuye market in Kisumu. Jua Kali retirement benefits schemes popularly known as the “Mbao Pension scheme” target the informal sector. PHOTO | FILE 

By CHARLES MWANIKI

In Summary

• 32 individual schemes had 144,640 members at the end of last year, up from 38,608 at the end of 2010, when assets stood at Sh9.1 billion.
• Individual schemes largely target Kenyans in informal employment, including those in the SME sector who have previously had low exposure to pension savings.
• The schemes, however, account for a small piece of the pensions industry in Kenya in spite of the rising number of contributors and assets under management.

Individual pension schemes have grown their asset base by two-and-a-half times over the past four years to Sh22.9 billion, after pulling in over 100,000 new savers over the period.

Retirements Benefits Authority (RBA) data shows the 32 individual schemes had 144,640 members at the end of last year, up from 38,608 at the end of 2010, when assets stood at Sh9.1 billion.

In 2014 alone, the assets grew by 31 per cent from 17.4 billion to 22.9 billion, meaning that the individual schemes outdid the industry growth rate of 13.1 per cent for the year.

“A significant part of the growth in membership of this sub sector has emanated from the Blue MSME’s Jua Kali Retirement benefits schemes popularly known as the “Mbao Pension scheme” which targets the informal sector,” said RBA.

“The scheme had 66,228 members as at December 2014 which represents 45.8 per cent of the total membership in individual pension plans.

‘‘However, in terms of assets, the largest individual pension plan is Jubilee Individual pension plan with a membership of 17,000 members and a total value of Sh5.6 billion as at December 2014.”

The Mbao Pension Scheme was established by the Kenya Jua Kali Co-operative Society Ltd as a voluntary retirement savings scheme in 2009, with members required to save a minimum of Sh500 per month, which translates to about Sh20 per day.

RBA chief executive officer Edward Odundo said earlier this year that the pensions penetration in the informal sector which employs 80 per cent of Kenyans remains at less than one per cent, indicating potential for growth.

Individual schemes largely target Kenyans in informal employment, including those in the SME sector who have previously had low exposure to pension savings.

Rising yields

In terms of contributions, the individual schemes received a total of Sh8.57 billion last year, which represented a 58 per cent increase over the Sh5.44 billion received in contributions in 2013.

The schemes, however, account for a small piece of the pensions industry in Kenya in spite of the rising number of contributors and assets under management.

The RBA data shows the total pension industry assets stood at Sh788.15 billion as at December 2014, compared to Sh696.68 billion a year earlier.

The biggest fund in 2014 in assets under management was Pinebridge Investments at Sh171.8 billion, followed by the National Social Security Fund (NSSF) with Sh141.4 billion and Genesis Kenya at Sh118.7 billion.

READ: Pinebridge widens asset gap on NSSF to Sh30bn

The pensions industry, which has seen impressive asset growth over the past three years mainly on the back of rising share and property prices, is however likely to see some slowdown as the stock market cools off.

Changing interest rates have also affected the performance of fixed income assets, although rising yields on government securities might offer avenue for growth of assets.