Sh2.1bn debt threatens to sink Egerton University pension scheme

The latest report by an independent Auditor reveals that Egerton University Retirement Benefits Scheme is owed more than Sh2.1billion by the employer who has failed to remit the monthly contributions.

This was revealed during a hushed Annual General Meeting held in Nakuru City on Friday. The AGM was attended by representatives from five public universities including Egerton, Chuka, Kisii, Tharaka and Laikipia.

However, Chuka University seems to be unhappy with the management of the scheme and announced during the meeting that it will move out and form its own independent pension scheme.

“The Retirement Benefits Authority (RBA) Act stipulates that the employer remit members’ contributions and interest accrued to the scheme in full on or before the 10th day of every month failure to which a penalty of five per cent of unremitted contributions or Sh20,000 which is higher. The scheme has unremitted contributions amounting to more than Sh2.1billion,” said the audit report by Ronalds LLP, a certified Public Accounts firm.

The audit report further drew the attention of more than 3,000 members of the scheme to non-compliance with the Retirement Benefits Act on investment.

Immovable property

 “The RBA Act requires that a limit of 30 per cent of scheme investments is invested in immovable property. As of June 2022, about 41.3 per cent of the scheme investments were held in immovable assets. High concentration of the scheme’s assets in immovable property indicates a material uncertainty on the ability of the scheme to meet its obligations when they fall due,” said the report.

The members raised concerns about the negative returns on their multi-million Shilling Golden Life Mall in Nakuru City.

The occupancy of the mall is about 60 per cent and the Trustees attribute this to the pandemic but they are optimistic it will get new tenants as the effects of the pandemic are dwindling.

However, it’s not doom and gloom as another property owned by the scheme in Nairobi, Unga House which was bought at Sh320 million its value has appreciated to Sh935 million over the last 15 years.

The rent collection as of the end of June 2022, was supposed to be Sh40 million but it fell short by Sh1 million. However, the balance was paid after the close of the financial year.

 “The depreciation of the building was not indicated in the audit report. We have some earnings of about Sh58 million and when you think about the depreciation rate of the building I am worried about what is happening to our investments,” lamented a member.

 “This is not a laughing matter. I’m supposed to be retiring with negative money. I have looked at my statement and I have lost Sh600,000 because of what the fund’s manager did. I’m equally concerned that the total scheme expenses were more than 1.17 per cent,” posed Prof Kariuki Ngari of Egerton University.

Added the don: “I’m going to be declared a retiree very soon and this is a very serious matter of concern. Trustees and Fund Managers note that I don’t want anybody managing my money and giving me a negative return at the end of the year.”

Investment strategy

The scheme chairperson Jediel Sendeyo said they were operating in the harsh economic situation due to the pressed economy.

“We want to realign our investment strategy with what is working well in the market,” said Mr Sendeyo.

In the last financial year 2021-2022, the scheme paid the retiring members Sh800 million while in the current financial year, the payout stands at Sh700 million.

RBA representative said it is not well with the scheme particularly, due to unremitted contributions but assured the members that the regulator has come up with a remedial plan to ensure scheme sponsors remit the members' contribution on time.

“We know what is happening with public universities' pension scheme and we have raised these concerns with the National Treasury to find a lasting solution. We have a Task Force in place looking at public pension schemes, particularly those facing financial challenges,” said the RBA official.

The fund manager Sanlam Investments East Africa Limited and Old Mutual Investment Group Limited generated about Sh650 million for the scheme.

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