Push to consolidate small pension schemes gathers pace in reforms

The push to consolidate small pension schemes is gaining momentum as industry players seek regulations specifying the least amount a retirement plan can hold.

Stakeholders said yesterday the sector is currently too fragmented for the pension assets under management to make meaningful contributions to the needy segments of the economy.

="https://www.standardmedia.co.ke/counties/article/2001427369/the-two-forces-behind-stock-price-changes#google_vignette">This is despite< the industry recording growth, with pension assets under management surpassing Sh2.3 trillion as of the end of December 2024, with 1,032 pension schemes.

For example, they said, the discourse for the pension sector to contribute to the government’s affordable housing or capital infrastructure projects can only come to fruition if there are economies of scale.

However, as noted by Fund Managers Association (FMA) Chief Executive Fred Mburu, there are 846 schemes that hold less than Sh1 billion.

“We think that size is sub-optimal,” he said. “We can have a conversation on what really is the definition of a small scheme. Is it Sh500 million or is it Sh1 billion?”

Mr Mburu said the move is meant to derive economies of scale from the industry. He said some amendments to the law would see small schemes accommodated under an umbrella scheme for investment purposes.

="https://www.standardmedia.co.ke/sports/topic/ngao-umbrella-pension-scheme">He noted that with “Infrastructure investment tends to be high-value tickets, and you cannot get into such opportunities when you have a small scheme,” he said during a roundtable with players in the pension sector attended by National Treasury Principal Secretary Dr Chris Kiptoo.

Treasury has constituted a committee that is already working on a strategy on how the government can leverage the pension assets, through public-private partnerships (PPPs), for the development of infrastructure.

The committee, put in place at the beginning of the year, is chaired by Dr Hosea Kili, chairperson of the Association of Pension Trustees and Administrators (Aptak), who is also the chief executive and group managing director of CPF Financial Services.

="https://www.standardmedia.co.ke/business/business/article/2001500183/britam-unveils-pension-scheme-for-small-businesses">The committee was “When we were in the Public Service Superannuation Scheme (PSSF), last year the CS gave directives to meet you [the industry] and see ways in which you can take advantage of the opportunities in the sector, like PPPs, for instance. I think there is good progress,” said Treasury PS, Dr Kiptoo, during the meeting. The Retirement Benefits Authority (RBA) Chairman Nelson Havi pointed out that despite asset classes that allow for investments in affordable housing and infrastructure, none have been made by schemes since 2020 

“Large schemes have the capacity to provide capital for infrastructure and climate-related initiatives, thereby playing their part as good corporate citizens while displacing the need for external borrowing,” said Mr Havi.