Covid dims pension schemes' returns

The returns by Kenyan pension schemes fell sharply last year owing to the impact of the coronavirus pandemic on the economy.

A study by Zamara shows the average returns of surveyed schemes was 7.3 per cent. This compared to 17.1 per cent recorded over a similar period in 2019.

“Over the 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,” said The Zamara Consulting Actuaries Schemes Survey December 2020.

"Performance in 2020 was negatively impacted by reduced economic activity brought about by the Covid-19 pandemic."

The survey, which is done quarterly, looked at the performance of 421 schemes with assets worth Sh951.8 billion under management.

For the final quarter of 2020, pension schemes recorded a slight fall of 1.2 per cent in returns attributed to poor performance in fixed-income but continued on a positive run.

This was the second quarter in a row with positive performance, offsetting the trend of negative performance in the first half of 2020.

The recovery was on the backdrop of improved investor sentiment and progress in Covid-19 vaccination.

For three years to December 31, 2020, the average return of surveyed schemes was an annualised 10 per cent.

However, over five years to December 31, 2020, the average return of the participating schemes was an annualised 11.3 per cent with a range of returns of 6.4 per cent.

“Schemes were able to comfortably beat inflation over these periods, with inflation being at 5.1 per cent over the three years and 6.9 per cent over the five years,” said the authors of the survey.

According to the survey, quarter four of 2020 recorded the best quarterly performance for the Stock market in the year as the Nairobi Securities Exchange All Share Index (NASI) and the Zamara Kenya Equity Index gained 8.7 per cent and 2.2 per cent respectively.

The survey profiles schemes into categories based on their asset allocation.

Aggressive schemes, with a higher proportion of assets invested in Equity and offshore asset classes, had a weighted average return of 3.8 per cent.

This compared to a 2.6 per return for schemes with a lower allocation or schemes with a conservative risk profile.