Kenya has been appointed to chair the interim Africa Pension Supervisors Forum.
The newly created Africa Pension Supervisors Forum will be deputised by Nigeria alongside South Africa, Rwanda and Zambia as executive members.
According to a statement from the Retirement Benefits Authority, its CEO Mr Nzomo Mutuku shall chair the Interim Executive Committee of the Africa Pension Supervisors Forum encompassing CEOs of Pension Supervisors across member African countries.
Mr Mutuku was nominated by his colleagues from participating African countries who were attending the inaugural Africa Pension Supervisors Forum hosted by Kenya’s Retirement Benefits Authority at Nairobi’s Radisson Blu hotel on Monday and Tuesday this week (September 16-17 2109).
“The interim team will run for two years from January 2019 to December 2021- when the interim committee hands over to a new committee that shall be elected. The committee will come up with a legal framework on how the secretariat shall run in collaboration with International Organisation of Pension Supervisors (IOPS),” said Mr. Mutuku.
The newly created forum aims to steer development of the pension sector in Africa.
The conference attracted delegates from eight African countries including Kenya, South Africa, Nigeria, Zambia, Uganda, South Sudan, Rwanda, Burundi. Other delegates came from Ireland, India and France.
“We agreed that an African body independent of IOPS which has only 15 African members, could be useful in encouraging other African countries to join IOPS… we shall benchmark on IOPS to set standards and encourage other none members to adopt those standards,” said Mr. Mutuku.
“Given the different levels of development across the African continent it was agreed that the Africa Pension Supervisors platform would benefit others who may not be able to join IOPS,” he added.
Mr Mutuku thanked the CEOs for appointing Kenya to chair the interim committee saying “Kenya is looking forward to deliver something they can be proud of in the next two years.”
The next Africa Pension Supervisors Forum shall be held in Rwanda.
RBA is mandated to regulate and supervise the establishment and management of retirement benefits schemes. The authority is also expected to protect the interests of members and sponsors of retirement benefits sector and promote the development of the retirement benefits sector. It is also mandated with advising the Cabinet Secretary, National Treasury on the national policy to be followed with regard to retirement benefits industry as well as implement all government policies relating to the industry.
Pension Industry in Kenya
As an industry, Kenya has made tremendous strides towards expanding coverage but there are still millions of Kenyans outside the pension bracket. The current pension coverage ratio (i.e. the proportion of labor force participating in a pension arrangement) in Kenya currently stands at 20 per cent.
This ratio is quite high in comparison to other Sub-Saharan Africa counties but is still insignificant compared with global average coverage ratio of 51% for Middle Income Countries, which Kenya is classified (average pension coverage ratio as at 2014 ( World Bank): Low Income countries – 17 per cent, Middle Income Countries – 51 per cent, High Income Countries – 90 per cent).
“One of the main contributing factors for the low pension coverage in Kenya is that a large component of the human capital is in the yet to be reached informal sector (that stood at 83.6% of total employment in 2018 – Economic Survey Report: 2019). We believe that Octagon’s Micro-pension solution we are launching today will play a key role in reaching out to this critical sector,” said Mr Mutuku during the launch of Octagon Micro-Pension Solution in October this year.
Individual Pension Plans (IPPs)
According to the CEO, the majority of the pension schemes were formed with the formal sector in mind. However, the Individual Pension Plans (IPPs) have the flexibility to accommodate members of the informal sector. The Authority encourages all individual pension plans to be innovative in order to attract more uncovered Kenyans to start saving for retirement.
“Another missing link has been how to sensitize and convince workers in the informal sector to join the pension plans and start saving towards their sunset years. Towards this end, the Authority has undertaken various pension education campaigns geared towards enhancing the scope of the covered population in the country.” He added.
To understand the main barriers to pensions saving and the impact of the Authority’s pension education campaigns, an impact assessment study was carried out for the very first time from July to November 2018. The findings of the study were incorporated in the Authority’s 2019/2024 Strategic plan which the authority is now implementing.
“Another recent study that we undertook with support from the World Bank focused on the challenges faced by existing schemes targeting the informal sector and how the Government can better support them.” said Mr Mutuku.
Data from RBA also notes that the pension industry has experienced growth with the latest statistics revealing an asset base of Sh1.2 Trillion ($11.54 billion dollars) as at 31 December 2018 despite a lot of volatility in the financial markets. We expect to see strong growth in the industry this year as products such as the Octagon Micro-Pension solution and others come on board and help bring more Kenyans into the industry.