Schemes earn pensioners average 7.3pc in returns

Zamara Group chief executive Sundeep Raichura. FILE PHOTO | NMG

By CHARLES MWANIKI
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Summary

• Pension scheme average returns dipped last year in comparison to 2019 as the Covid pandemic took a toll on the economy, although they still outperformed inflation.
• Analysis done by funds administrator Zamara shows that the median return for the surveyed pension schemes stood at 7.3 per cent last year, compared to 17.1 per cent in 2019, with offshore investments performing better than other asset classes.

Pension scheme average returns dipped last year in comparison to 2019 as the Covid pandemic took a toll on the economy, although they still outperformed inflation.

Analysis done by funds administrator Zamara shows that the median return for the surveyed pension schemes stood at 7.3 per cent last year, compared to 17.1 per cent in 2019, with offshore investments performing better than other asset classes.

The 2020 returns beat the average inflation for the year which stood at 5.2 per cent, meaning that pensioners avoided erosion of their funds in real terms. The last year in which pension returns failed to beat inflation was 2018.

“Over the one-year period to December 31, 2020, the median return of the participating schemes was 7.3 per cent compared to 17.1 per cent over a similar period in 2019. Performance in 2020 was negatively impacted by reduced economic activity brought about by the Covid -19 pandemic,” said Zamara in their report.

The survey covered 421 schemes with a total of Sh951.8 billion assets under management—equivalent to 73 per cent of the industry’s total assets under management.

The allocation of assets was once again heavily tilted towards the fixed income segment, averaging 66.5 per cent, followed by equities at 21.3 per cent, property at 11 per cent and offshore investments at 1.2 per cent.

In terms of asset performance, equities were the only class in the red, averaging -10.6 per cent during the year. Fixed income assets gave pensioners a return of 13 per cent, while offshore returns stood at 37.4 per cent.