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September 19, 2018

Experts push for forced pension contributions

Zamara group chief executive Officer Sundeep Raichura during a media briefing in Nairobi on August 13,2018.
Photo/Enos Teche.
Zamara group chief executive Officer Sundeep Raichura during a media briefing in Nairobi on August 13,2018. Photo/Enos Teche.

The government should make pension contributions compulsory to all, a pension expert has claimed.

Sundeep Raichura of retirement fund Zamara said the contributions should be moved up from the current Sh400 a month to at least 15 per cent of employees income.

The fund is proposing contributions of at least Sh1,000 monthly for the informal sector workers. The CEO said this move would boost the saving pool in the country and increase coverage of pension benefits.

“ making pension contributions compulsory at a sensible level, not only would we see more Kenyans becoming more financially secure, but also a much faster rate of increase in the retirement fund asset base,” Raichura said. He was speaking during the release of the actuaries schemes' quarterly survey ending June.

According to the survey, the base is of very low coverage of pension benefits of less than 20 per cent. Due to this, retirees end up earning less than the world recommended income upon retirement due to the poor saving culture.

According to the fund, most retirees live on about 22 per cent of their per-retirement salaries, against the market’s recommended standard of 66 per cent.

Raichura told the Star on the sidelines of the survey launch that the benefits should be pushed to 70 per cent for it to be helpful. Currently the asset base of Kenyas pension industry is estimated at around Sh1.2 trillion. Of the Sh1.2 trillion, 75 per cent of it or about Sh732 billion worth of assets belong to 417 retirement funds.

Findings of the survey show that 93 per cent of pension schemes invest more in fixed income securities and equities.

“The schemes are shying away from other classes of investment such as private equity and infrastructure as they require more due diligence, offer longterm investment returns and are a bit more complicated,” the CEO said.

The average proportion invested in property is 4.9 per cent, mostly by larger schemes while offshore investment stands at 1.9 per cent.

Other proposed policy Changes by the fund include legislated minimum contributions, ability to use pension assets for housing or education and introduction of more diversified pension assets that would include investment in private equity or infrastructure.

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