Pension assets in fixed deposits drop 11pc on low interest rates
Business
By
Graham Kajilwa
| Mar 16, 2026
Pension investments in fixed deposits declined by 11.7 per cent in the six months to December 2025 following the Central Bank of Kenya’s (CBK) consistent reduction of the base lending rate. An industry brief by the Retirement Benefits Authority (RBA) shows this is the only investment vehicle – of the approved 15 – that reported a drop during the period.
The drop, explained the RBA, is associated with lower income from fixed deposits due to the now single-digit interest rate.
Two years ago, the base lending rate stood at 13.0 per cent, which was attractive for fixed deposit investments. However, since August 2024, CBK has been consistently lowering this rate with the latest – as of February this year – settling at 8.75 per cent.
“Following the CBR decline to 8.75 per cent in February 2026, income from government securities and other fixed-income assets is expected to decline,” says the RBA in the brief.
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The industry brief shows that cash invested in fixed deposit accounts for 2.01 per cent of total pension assets under management.
“Fixed deposits were the only asset class to record a decline during the period, decreasing by 11.66 per cent (5.2 per cent yearly growth) to Sh56.50 billion.
Consequently, the portfolio’s share in this asset class dropped from 2.53 per cent in June 2025 to 2.01 per cent by December 2025,” says RBA.
“This reduction is attributed to the easing of monetary policy and lowering of interest rates.” In December 2024, investment in fixed deposits stood at Sh53.7 billion, down from Sh81.93 billion.
Between June 2023 and December 2023, investment of pension assets in fixed deposits grew from Sh67.7 billion to Sh81.93 billion. This growth coincides with the base lending rate rising to a double-digit level, as CBK held it at 10.50 per cent during the August and October 2023 cycles.
Despite the recent drop in the base lending rate, investments in government securities – whose returns are benchmarked by the CBR – grew 10.25 per cent during the period and still hold the lead at Sh1.5 trillion, comprising 52.14 per cent of the total Sh2.8 trillion assets under management. The Sh2.8 trillion is a year-on-year growth of 24.57 per cent.
“Government Securities remained the dominant asset class, growing by 10.25 per cent over the last six months to reach Sh1,465.55 billion, maintaining a portfolio share of 52.18 per cent,” says RBA.
“Growth moderated compared to the first half of the year as the government lowered the Central Bank Rate (CBR) to 9.0 per cent, exerting downward pressure on yields for new debt issues, making them less attractive to investors.”
Pension asset investment in government securities stood at Sh1.2 trillion in December 2024 and Sh818.9 billion in December 2023. RBA says that as a significant portion of pension assets is held in government securities and fixed deposits, CBR remains a key driver of scheme earnings.
“The second half of 2025 saw a continued easing of monetary policy, with the CBR declining from 9.8 per cent in July to 9.0 per cent by December. This downward trend, averaging 9.8 per cent annually, reflects a shift toward a more accommodative stance amid stable inflation and currency exchange rates,” says the pension regulator.