Strategic planning needed to safeguard retirement benefits
Kenyans are retiring with only 22 per cent of their pre-retirement salaries. FILE PHOTO | NMG
What you need to know:
Time has come for a paradigm shift in the management of retirement benefits schemes through applying risk management concepts, identifying and pursuing strategic objectives.
To cushion ourselves from the impact of being out of employment, most of us join retirement benefit schemes and save a percentage of our income with the hope of reaping healthy returns as a lump sum or monthly income at retirement.
Whereas saving in a retirement benefit scheme is a noble idea, do you know where your money is? How much have you accumulated over the years of hard work and sweat? Is it growing or would it have been safer under your mattress?
The answers to these questions are determined by the effectiveness of the leadership managing your retirement benefits schemes particularly being the Trustees.
Therefore, it is fundamental for Trustees to be well equipped and guided in managing and growing your savings.
The evolution and rapid growth of the retirement benefits sector over the last decade driven by the changes in regulations and on-going reforms within the financial services sector continues to pose critical challenges within the industry.
The underlying related risks of governance, regulatory compliance, tax compliance and challenges in investment management make it difficult for Trustees to effectively discharge their mandate.
Additionally, the uncertainty of the business environment in which retirement benefits schemes operate is increasingly making it difficult for retirement benefits schemes to achieve the ultimate objective of delivering of superior retirement packages to their members.
Unfortunately, even with all the challenges looming, majority of the retirement benefits schemes are still being run in a nonchalant manner.
Schemes worth billions of shillings – with stronger balance sheets than majority of the businesses in town – are run without clear strategy, objectives and guidelines.
According to a study on Governance of Retirement Benefits Schemes in Kenya, conducted by Enwealth Financial Services in conjunction with Strathmore University and the Institute of Human Resource Management in 2017, revealed that close to 40 per cent of Trustees cannot explain their fund’s strategic goals and accomplishments. The implication of this is that one in every two Trustees has no clear vision of how to deliver successful outcomes for their members in retirement.
Time has come for a paradigm shift in the management of retirement benefits schemes through applying risk management concepts, identifying and pursuing strategic objectives.
A strategic plan will enable both the members and trustees to have a clear understanding of the ‘Big Picture’ and the day to day requirements to achieve the vision.
They should establish member based strategies that deliver success not only for the entire group but for each and every participating individual.
Trustees must also consider the impact of globalization and the information age on administrative efficiency, member communication and investment performance.
The Trustees should also have policies, processes and procedures necessary to guide the Trustees in governing the scheme whilst safeguarding the member’s investments.
Clearly stated the roles and responsibilities of each Trustee and the various committees constituted under them should be in place as well as performance goals for the various service providers.
Simon Wafubwa is CEO, Enwealth Financial Services.
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