Impact of covid-19 on pension schemes


 Economic prospects are predicting that 2021 will be a happier year for Pension Schemes. The devasting impact of Covid-19 had far reaching implications on the pension sector, especially in 2020 caused by several factors.

Also Read: Covid Economics: Kenya’s navigation of debt relief

  • We had massive payouts, especially in the hospitality sector as companies closed down and retrenched. Pension scheme members made early access to pension benefits to cushion their financial well-being.
  • A number of employers could not afford contributions funding to pension scheme and So they adapted to this challenge by obtaining a reprieve from the Retirement Benefits Authority to have temporal suspension of contributions deduction and remittance.
  • The stock market also had a significant dip in valuations occasioned decline in earnings from a number of counters especially banking sector.
  • In 2020 the GDP growth dropped to 1% growth compared to the projected growth of about 5%.

Despite the above challenges, from a policy perspective, there was resilience in the pension sector from legislative adjustment allowing employers to review pension contributions while service providers on the other hand became innovative with their product offering.

Also Read: Coronavirus: It’s time we strengthened our resilience

As Enwealth Financial Services, we supported our customers by providing personal financial literacy online training to almost 20,000 people on how to manage their finances in an economy affected by the pandemic.  Our retail products equally performed well from an investment perspective with one of our products earning the highest return of up to 11%

2021 Projections

We are optimistic about 2021 prospects. By second week of January, we were already seeing a rebound in the stock market by slightly over 2% year to date. We expect substantial growth as a number of companies have gotten back to normalcy and contributions and funding have resumed. We have observed a huge interest in the use of pension for home ownership, and have innovatively designed a support unit to enable our customers benefit in this opportunity.

We hold a positive view that Economic growth is expected to recover marginally in 2021, due to the increased economic activity as government continues to open the economy. Education sector is recovering with the opening of schools. The diaspora remittance has significantly increased coupled with an increased foreigner trade interest in the stock exchange market.

The decline in stock market value for a number of accouters presented a huge opportunity for purchase and fair pricing. The rally up will be a huge harvest season for our clients’ portfolios through capital gains and dividend income. Our clients stand to benefit as we grow their retirement savings in a safe, tax efficient and sustainable way in their retirements.

In addition, the approval of the roll out of the Covid-19 vaccine is a big boost to the global economies. However, Covid-19 is still the single biggest threat to the global economy especially as governments’ response to new strains of the virus remains uncertain.

We further have a positive outlook on foreign policies for Africa, arising from the transition in government in the USA, as well the UK trade ties such as European Union and the Brexit terms which have unlocked trade opportunities in Kenya.

We remain upbeat and resilient that the opportunity arising out of the recovery of the economy shall be wisely harnessed to crystalize value for our customers through mutual partnerships of various stakeholders in the governance framework espoused within the retirement benefits regulations.

By Simon Wafubwa, CEO Enwealth Financial Services

Also Read: Economic activities to rebound faster after Covid-19 vaccines 

Opinions by contributors are views of respected thought leaders in the respective industries they operate in. The Exchange is a close partner with each of the various opinion contributors.

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