NCBA, Co-operative, and Stanbic banks have won the lucrative deal to keep the more than Sh100 billion in pension contributions held by the Public Service Superannuation Scheme (PSSS).
NCBA, Co-operative, and Stanbic banks have won the lucrative deal to keep the ...
more than Sh100 billion in pension contributions held by the Public Service Superannuation Scheme (PSSS).The PSSS disclosed the three banks pipped eight other rival registered custodians of pension funds to the deal and will now handle billions collected from more than 350,000 civil servants, including police officers and teachers who started contributing to their own pension savings scheme in 2021.
“For now, we have a clear roadmap and have already done contracts with a fund manager, three custodians, and a fund administrator. This has been done through a competitive process with the contracts being awarded through the scheme trustees. All we are doing on our part is to monitor that each party is playing its role,” said PSSS chief executive Jonah Aiyabei.
The three banks beat Bank of Africa, Equity, I&M, KCB, the National Bank of Kenya, Prime Bank, SBM, and Standard Chartered who are registered custodians of pension banks as of 2020. All the 11 banks had been in a heated race for lucrative contracts to keep the contributions, which began in January 2021.
A work plan by the Treasury showed that the custodian banks will carry out the services for three years renewable on expiry by mutual agreement for a further period of three years depending on performance.
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The banks are expected to keep all the schemes’ assets and produce quarterly financial management reports on the fund. The custodians will also carry out statistical analysis of the investments and returns on investments from pension funds in their custody and provide the data to the fund administrator.
Three years since the start of the contributions, PSSS assets under management have touched Sh105 billion and have more than 422,000 members.
Asset management firm GenAfrica runs the scheme while CPF is its administrator.
“We are now second after the NSSF (National Social Security Fund) with around Sh105 billion in assets value driven by both member and employer contributions. Combined, we are getting around Sh3.6 billion in contributions every month,” said Dr Aiyabei.
The PSSS is a defined contribution scheme under which civil servants save towards their retirement benefits, which the Exchequer tops up.
From January, civil servants were expected to contribute 7.5 percent of their gross salaries from five and two percent previously while the government matches the contribution at 15 percent of civil servants' gross salaries.
The scheme covers civil servants including teachers employed by the Teachers Service Commission (TSC) and disciplined forces.
Previously, the government operated a non-contributory pension scheme financed fully by the exchequer.
The model however proved unsustainable as the full burden of the pension bill was placed on taxpayers.
Read: Pension bill goes up by Sh40bn in 10 months
The creation of the PSSS was part of reforms in the public service pensions sector which gave rise to the 2012 Public Service Superannuation Scheme Act.
All public defined benefit schemes were converted to defined contributory schemes aligning the schemes to best industry practices.
Civil servants below the age of 45 along with new hires in the sector were obligated to make contributions to the fund while workers aged above 45 were given the option to join the contributory scheme.
→ kmuiruri@ke.nationmedia.com
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