Civil servants pension funds reap Sh100billion from bonds, equities and offshore investments

Public Service Superannuation Fund CEO Jonah Aiyabei /HANDOUT

High yields on state securities, equities and offshore investments have seen the civil servants pension provider nearly double its value to Sh242 billion in one year.

The performance defied a threefold increase in the number of pensioners paid off in the period under review.

Data by the Public Service Superannuation Fund (PSSF), which manages retirement savings for civil servants, teachers and uniformed services, shows that its asset value expanded by 70.4 per cent, from Sh142 billion in 2024 to Sh242 billion in 2025.

The growth partly created by the National Treasury’s hunger for domestic borrowing saw the fund outpace virtually every other institutional investor in Kenya.

According to the fund, more than 80 per cent of its portfolio is parked in Treasury bonds in effect making public sector workers’ retirement money a primary financier of Kenya’s ballooning fiscal deficit.

“Investment income increased from Sh14.054 billion in 2024 to Sh25.369 billion in 2025, reflecting a robust 80.5 per cent rise driven by strategic allocations in government securities, equities and offshore investments,” said the funds’ board chair Ambassador Tuneiya Hussein Dado.

The three portfolios benefited from improving market sentiment, favourable interest rates and stabilisation of the Kenyan shilling.

Kenyan equities rallied during the year, supported by strong corporate earnings, while yields on government paper remained elevated, providing pension funds with high risk-adjusted returns.

Offshore investments offered diversification and currency hedging as global markets recovered from post-pandemic shocks.

“The PSSF’s investment approach, which has historically leaned heavily on government securities, was complemented by a deliberate shift towards alternative asset classes, including real estate and private equity, in line with regulatory limits and asset diversification strategies,” the fund said in its financials.

According to the management, the Fund has diversified into nine asset classes, up from one at inception four years ago, a major restructuring aimed at enhancing long-term sustainability.

The financial performance was supported by a continued expansion of scheme membership and contributions.

During the year, monthly remittances exceeded Sh4.2 billion, lifting total annual contributions to Sh52.7 billion, an 18 per cent rise compared to the previous year.

“Membership also grew to 505,282 as of June 2025, up from 440,554 the previous year, driven by better compliance and onboarding of new public sector workers,” the report shows.

The maturing of the scheme resulted in a sharp increase in benefit payments, with claims paid rising from Sh59.7 million to Sh154 million, a 153 per cent jump, as more members retired under the new contributory system.

Equity markets also delivered strong performance, with the All-Share Index rising by 17.3 per cent, reflecting renewed investor confidence and resilient earnings.

Offshore investments also paid off as the shilling strengthened from Sh159.7 to Sh129.3 against the dollar, boosting foreign holdings.

“Operationally, the Fund implemented an aggressive digitisation programme, acquiring and operationalising a new ERP system to support automation of finance, procurement, HR and claims processes,” said the funds CEO Jonah Aiyabei.

While the Fund boasts efficiency improvements, its rapid scaling has not come in cheap.

The cost of administration shot up from Sh424 million to Sh708 million, reflecting a 66 per cent rise in overheads.

“To support expanding operations, PSSF recruited 44 additional staff and relocated to upgraded office premises at CBK Pension Towers,” the report says.

In a bid to strengthen accountability, the Fund says it developed and approved 18 governance and risk management policies, including anti-money laundering, whistleblowing, conflict of interest, ESG, data protection and risk policy frameworks.

Aiyabei added that the Fund plans to accelerate investment in real estate, private equity and infrastructure and expand its contribution base through product innovation.

Two new savings options, a Trust Fund and a Preserved Retirement Member Fund — were developed to expand retirement choices for members.

The chief executive officer said the Fund remains committed to “building a resilient and inclusive retirement system”, adding that the 2023–2027 strategic plan prioritises sustainability, financial growth and digital transformation.