Workers’ retirement savings outpace rate of inflation with 24pc rise
An investor monitors trading at the Nairobi Securities Exchange last year. Investments at the stock market were the highest earning asset class in percentage terms last year. FILE
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Annualised returns to retirement funds which stood at 17.9 per cent by the end of the third quarter jumped by almost seven per cent in the year to December 2013.
Workers’ retirement savings grew 24 per cent last year boosted by outpacing the erosion by inflation which averaged 5.7 per cent in 2013.
A survey by the Actuarial Services (ACTSERV) East Africa on retirement schemes shows that annualised returns to retirement funds which stood at 17.9 per cent by the end of the third quarter jumped by almost seven per cent in the year to December 2013.
The annualised fixed income returns improved to 11.2 per cent at the end of the year from 7.7 per cent in September, helping offset a slight dip in returns from equities in the last quarter of the year.
“There has been an improvement in the one-year overall average return from 17.9 per cent in the third quarter of 2013 to 24.2 per cent in the fourth quarter.
There was an increase in the one-year fixed income average return of 11.2 per cent compared to 7.7 per cent in the third quarter of 2013,” said ACTSERV in the report.
Investments at the stock market remained the highest earning asset class in percentage terms, with average returns of 43.1 per cent by the end of December, a slight drop from 44.8 per cent in the third quarter of 2013.
The average rate of return in 2013 matched that of 2012, which stood at of 28.39 per cent.
The positive returns in 2012 came after four straight years of value erosion that began with America’s sub-prime mortgage crisis in the last quarter of 2008.
The different asset classes had ups and downs during the year, with equities under pressure in February and March as a result of the General Election, while fixed income investments were squeezed by low government paper rates in the third quarter.
Returns on the government securities fell to as low as five per cent on the short-term treasury bills in July, but had gained towards the end of the year to touch the nine to 10 per cent range.
In terms of spread of investments in the 109 surveyed pension schemes with a combined fund value of Sh103 billion, about 65.1 per cent of funds were invested in fixed income as at December 31, 2013.
Investments in equities at the end of the year stood at 28 per cent, slightly up from the 27.2 per cent in September 2013. The funds invested in offshore assets stood at 3.2 per cent, compared to 3.4 per cent in the third quarter.
Investments in property remained unchanged from the previous quarter at 1.8 per cent of the total portfolio.
In the macroeconomic outlook report for 2014 released this week, analysts at Kestrel Capital say that there could be an increase in equity investment by pension schemes if the upcoming Eurobond issue reduces the government’s appetite for borrowing, which would bring down yields from government securities.
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