Pension contributions drop by Sh2 billion
MONEY & CAREERS
By Awal Mohammed | December 3rd 2020
The pension industry is expected to lose Sh2 billion in contributions as the coronavirus continues to hurt the economy.
This is according to the financial stability report for 2020 that was released on Thursday which comprises reports from all state regulators in the financial industry.
“Pensions industry is therefore projected to lose about Sh. 1.78 billion in contributions, eroding pension’s assets considering the foregone investment income realizable from the contributions,” read the report in part.
The report comes a few months after an industry analysis by fund administrator Zamara showed that retirement schemes’ returns recovered in the second quarter of 2020 compared to a negative position seen in the first quarter of 2019.
The quarter two recovery was attributed to a good performance from equities and offshore investments.
When the virus docked Kenyan shores suspension of pension contributions was among the first cost-cutting measures taken by employers in a bid to trim their payroll expenses.
At a low penetration of 20 per cent in both the formal and informal sectors, the Kenyan pension industry is set to dip further with gains in membership rolled back.
The report shows that a bulk of employers had applied to be exempted from paying pension contributions of their employees.
Data at the Retirement Benefits Authority (RBA) show that the suspensions applied by firms vary, with some stretching up to nine months.
“A total of 83 employers participating in 43 retirement benefits schemes had applied for suspension of contributions owing to the effects of the pandemic,” the report reads.
The expected decline in the sector puts a strain on a sector that had posted positive growth in the last two years.
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