Britam contracts Equity, Family banks to sell pension scheme

Britam has contracted Equity and Family banks to sell its pension scheme to small and medium firms in the first such deal in the financial sector.

The financial services company will run the business under Britam Asset Managers (BAM), which is allowed to invest in riskier businesses unlike the guaranteed pension scheme now running under its insurance business.

“With this we are targeting employees with young employers who would not just want a guaranteed arrangement whose return is overall lower than the segregated arrangement,” said business development manager at BAM John Atyang.

Britam Asset Managers said the new scheme will leverage on a wide distribution network provided by Britam offices, Family’s 80 branches and Equity’s 160 branches to cut operational costs associated with running similar schemes.

Under the arrangement, the banks will receive commission for SMEs it introduces to the scheme giving it incentive to push the product through their staff.

Mr Atyang said any company with two or more employees was eligible to join the scheme.

The new NSSF Act whose enforcement has been held back by the courts will require all companies including SMEs to contribute retirement savings for their employees.

The contributions will be divided into two parts, with the first referred to as tier one being submitted to the national pension scheme while companies will have a choice of whether to save tier two with NSSF or with any other licensed scheme.

It is the tier-two savings that BAM is seeking to pool. Following increased competition for the category of contributions among private schemes and NSSF, the returns made by fund managers will be a key competition factor.

BAM said its fund grew by 23 per cent last year.

Pension coverage remains low at about 15 per cent of the country’s labour force.

This is because the majority of people work in the informal sector, and their employers seek to avoid the additional cost associated with matching employee contributions.

READ: Britam taps NSSF executives to grow management unit

The Act also compels employers to contribute pension savings for contract and casual employees.

Previously locked out of the NSSF-managed provident scheme, casual workers will be required to contribute six per cent of their earnings to the national pension fund regardless of the number of days contracted and their contributions matched by employers.

Retirement Benefits Authority is also pushing for persons to be registered to the pension scheme at the same time they are issued with national identity cards to ensure that they start saving for their old age early.

Retirement savings by workers in the informal sector collected through the Mbao pension scheme launched five years ago have hit the Sh100 million mark, underlining growing interest by workers to secure a comfortable old age.