Pension fund assets under management have crossed the Sh2 trillion mark for the first time on increased compulsory retirement contributions and higher returns during the year ending December 2024.
The latest data from the Retirement Benefits Authority (RBA) shows that the assets hit Sh2.207 trillion at the end of December last year, marking a 27.9 percent growth from Sh1.725 trillion in the preceding similar period last year.
The rise in assets under management to a record high was mainly driven by increased compulsory contributions to the National Social Security Fund (NSSF) in line with the continued implementation of the NSSF Act of 2013.
In addition, pension schemes benefited from increased returns on investments, mainly government securities, guaranteed funds, quoted equities, and immovable property.
“The growth in assets witnessed within the period emanated from contributions and investment income, each taking a 50 percent split. The increased contributions from members during the period are mainly attributable to the enhanced NSSF contributions that moved to year three of implementation,” said RBA in an industry brief note.
The NSSF Act 2013 was passed in 2013, but the implementation of the section on increasing monthly contributions from Sh400, split equally between employers and employees, was delayed until 2023 due to legal battles.
The first phase of increased NSSF deductions started on February 1, 2023, with workers and employers parting with Sh1,080 each before rising to Sh2,160 last year. Effective February this year, the figure rose further to Sh4,320 in a move that guarantees the NSSF kitty another rise.
The increased contributions during the year saw assets held by NSSF grow by Sh77.71 billion or 18.9 percent in six months to close December last year at Sh478 billion from Sh402 billion as of 30 June 2024.
RBA data showed contributions to NSSF hit Sh59.25 billion, marking a 2.33 times rise from Sh25.39 billion in the prior year.
During the year under review, five traditional asset classes— government securities, guaranteed funds, quoted equities, listed corporate bonds, and immovable property—continued to dominate pension funds’ investments, accounting for 94.82 percent of total pension assets across the six primary investment categories.
NSSF portfolio mirrored the industry mix with 67 percent of assets invested in government securities, followed by listed shares (14.28 percent), immovable property (7.43 percent), fixed deposits (3.05 percent), unlisted shares (1.98 percent), corporate bonds (0.35 percent) and cash and demand deposits (0.29 percent).
Investments in government securities saw a significant 46 percent increase, driven by rising interest rates, while quoted equities also recorded a growth of 42 percent, supported by a market rebound, particularly in the last quarter of last year.
RBA expects the retirement benefits assets to record further growth this year, driven by member contributions, especially with the latest increase in contributions to NSSF.
In addition, RBA expects investment income from fixed-income investments, where most schemes have invested their funds to further fuel growth.
“Lastly, the rebound of the stock markets is also expected to further boost growth, especially for schemes that have substantial investments in listed equities,” said RBA.
