Retirement benefits schemes can invest up to 10 percent of their portfolio in private equity and venture capital licensed by Capital Markets Authority (CMA). The Retirement Benefits Authority Chief Executive Officer (RBA), Dr Edward Odundo, says RBA is working closely with CMA and other industry players to develop criteria for licensing private equity funds.
Addressing over 300 delegates from the East Africa during Alexander Forbes Annual Retirement Conference at Leisure Lodge in Diani, Kwale County, Dr Odundo said Kenyans highly regard investing in property due to low risk, portfolio diversification, and income producing among others.
“Investment in real estate has been shown to reduce risk, enhance returns, act as a hedge for inflation and deliver strong cash flows to the investor,” he said. “But investing in real estate is illiquid and requires large sums of funds, which locks out many small schemes.”
Dr Odundo said the government was planning to roll out a national pension policy through a wider collaborative process that captures all stakeholder views in consultation with the National Treasury. The RBA boss said the main objective of the policy will be to provide a broad and clear policy direction for the growth and development of the retirement benefits sector upon which all subsequent pension sector reforms will be anchored.
“This policy will eventually enable the government to achieve the provision of adequate, affordable and sustainable retirement benefits to Kenyan workers through a robust pension system.”
Dr. Odundo urged the delegates to take advantage of the East African integration process and explore the retirement benefits of the regional market. “As financial regulators we classify EAC as a domestic market and all investments carried out in any of the six member states is considered as local investments. Our people and businesses are moving across the boarders and therefore we need to put pension matters in that perspective,” he said.
He said the government was working towards harmonizing tax regimes pertaining to the pension sector in the region in order to fast-track ability to transfer benefits between partner states under the Common Market Protocol. “We are also seeking to harmonize our investment guidelines within the EAC in so far as investing pension funds is concerned,” he added.
Alexander Forbes Group Chief Executive Officer Sundeep Raichura said there was need to address key challenges of increasing coverage and improving benefit adequacy levels of the country’s pension system. He said the pension reforms in Kenya initiated since 1997 have been very successful.
“This means that as a country, we are well positioned to deepen our pension reforms and move towards making pension saving mandatory by implementing the NSSF reforms and reform of the private pension system,” said Mr Raichura.
He, however, warned that for any contractual saving system to succeed there must be utmost trust and confidence of stakeholders. He called on policy makers, industry players, the NSSF and all stakeholders to work together and iron out issues and implement workable solutions to grow the pensions industry.
