Why number of pension schemes has dropped

The latest data from the pensions regulator shows a drop in the number of schemes to 951 as the value of assets under management grew by 21.18 per cent, the highest over the last decade.

The Retirement Benefits Authority (RBA), in its Statistical Digest 2024, shows the number of schemes stood at 951 last year, down from 967 in 2023, a contraction of two per cent.

However, this drop, as explained by the RBA, is associated with smaller schemes joining umbrella schemes, a push that has gained momentum from industry players in the recent past.

As a result, the number of schemes holding larger amounts in fund value is increasing. The sector now boasts Sh2.2 trillion in assets under management, a growth of 21.18 per cent from Sh1.8 trillion in 2023. 

RBA's data shows that in 2023, there were 280 schemes with less than Sh100 million in fund value, a figure that dropped to 233 last year.

Those holding between Sh100 million and Sh500 million dropped from 335 to 329, while those holding between Sh500 million and Sh1 billion increased from 127 to 131.

Schemes holding between Sh1 billion and Sh5 billion increased from 157 to 182, and those holding between Sh5 billion and Sh10 billion increased from 32 to 34.

Those holding between Sh10 billion and Sh50 billion, on the other hand, increased from 34 to 37, as those holding more than Sh50 billion increased to five from two.

“The largest decline (in the number of pension schemes) occurred in schemes under Sh100 million, dropping from 280 to 233 (-17 per cent), while all other categories of schemes above 500 million fund value grew, reflecting a trend toward scheme consolidation,” says RBA in the report.

The report adds that as of the end of December 2024, 951 schemes had submitted their 2023-2024 audited accounts.

“Analysis of these submissions reveals that a significant portion of the total fund value, 62.92 per cent, is concentrated in schemes with assets exceeding Sh10 billion,” the regulator says in the report.

“Notably, five schemes with assets above Sh50 billion account for 30 per cent of the total fund value, while 37 schemes with assets between Sh10 billion and Sh50 billion contribute 32.92 per cent.”

There has been a sustained push in the recent past from the National Treasury and key industry players to have smaller schemes consolidated under umbrella schemes for a multiplier effect to be witnessed in the sector in terms of investments and returns.

This is particularly critical as the government has now positioned the pension sector as a major player in infrastructure projects through public-private partnerships (PPPs).

This has been informed by the country’s shrinking fiscal space to fund capital-intensive projects such as dams and roads.

A meeting between National Treasury Principal Secretary Chris Kiptoo and industry players in April this year sought regulations in order to push smaller schemes either to merge or go under umbrella schemes.

“We think that size is sub-optimal. We can have a conversation on what the definition of a small scheme is. Is it Sh500 million or is it Sh1 billion?” posed Fund Managers Association Chief Executive Fred Mburu.

“When I talk of consolidation, we need to see if we can also consolidate among service providers,” added National Social Security Fund (NSSF) Managing Trustee and Chief Executive David Koros during the meeting.

Taifa Pension Fund, under the CPF Group, is one of such umbrella schemes that recently came into the market to help consolidate smaller schemes, reducing administrative and service provider costs associated with pension management.

Taifa (Umbrella) Pension Fund, started in 2022, now boasts Sh903.8 million of assets under management with a 13.7 per cent return in 2024.

“We are proud to offer a reliable, inclusive and professionally managed scheme that makes it easier for employers to meet their statutory obligations while ensuring sustainable retirement benefits for their employees,” said CPG Group Managing Director and Chief Executive  Dr Hosea Kili during the release of the umbrella scheme’s financials on Tuesday.