Pensions outperform inflation by 26pc

Zamara Group CEO Sundeep Raichura. [File, Standard]

Kenyan pension schemes delivered their strongest returns in years, outpacing inflation by a staggering 26 per cent in the 12 months to June 2025, new data shows.

According to Zamara Consulting Actuaries Schemes Survey's (Z-CASS) latest report, covering 407 schemes with Sh1.3 trillion in assets, the industry registered robust returns from local equities (50.7 per cent) and government bonds (27.8 per cent).

This was the first time in years that the schemes had outperformed inflation.

"This year's performance is a reminder that disciplined investing, diversification, and a long-term perspective can deliver real value to pension members," said Zamara Group Chief Executive Sundeep Raichura, commenting on the report.

The June 2025 median return of 30.0 per cent over one year, he noted, marked a significant improvement compared to recent years when pension schemes struggled to keep pace with inflation.

In 2022 and 2023, annual inflation stood at 7.9 per cent in both years, while the corresponding one-year returns for pension schemes were just 0.8 per cent and 6.6 per cent, respectively.

This year, however, performance exceeded the annual inflation rate of 3.8 per cent by a wide margin, enhancing members' real purchasing power.

Offshore investments for Kenyan investors have experienced periods of volatility driven by currency movements and geopolitical risks.

"Nonetheless, they emerged as the top-performing asset class over both the three-year (22.2 per cent) and five-year (13.9 per cent) periods," says the report.

"The asset class not only outperformed major global benchmarks but also delivered higher returns than local equities and Government Bonds, highlighting the long-term benefits of global diversification in pension portfolios."

Not all pension schemes had exposure to offshore investments, however, among the 190 schemes in the survey that did, with the average allocation standing at just two per cent, indicating limited uptake and potential room for further diversification.

Schemes that were more conservative in strategy, outperformed in this period.

Although moderate and aggressive schemes performed strongly over the quarter and year, it's the conservative schemes that won in the long run.

Conservative schemes in the survey are defined as those with a large allocation to government bonds (over 80 per cent). African countries (Kenya, Uganda, Tanzania, Rwanda, Nigeria, Malawi and DRC).