After nearly two decades at the Kenya Pipeline Company where he managed the State corporation’s pension scheme and later its Morendat School for Oil and Gas, Dr Jonah Aiyabei has recently been tasked with overseeing the operations of the Public Service Superannuation Scheme (PSSS).
The last time we saw you was at KPC as Morendat’s executive director. You are now back in the pensions space. How has the previous experience helped with your transition?
Coming back to the industry has been like landing home. It’s an exciting area to be and the most exciting part of it is to learn that the people in the industry are still soldiering on. The key thing to mention is that PSSS is now a bigger scheme in terms of membership, the magnitude is therefore big including the fund’s value.
The challenge, however, is to develop a brand identity as this scheme is relatively new. We are now spending time developing what we would like to project to our members.
It’s only been three years but you already have more than Sh100 billion in assets under management. What do you feel is the significance of this milestone?
We are now second after the NSSF with around Sh105 billion in assets value driven by both member and employer contributions. Combined, we are getting around Sh3.6 billion in contributions every month. Our scheme, however, is yet to be mature in terms of retirees exiting. When the scheme was started, it targeted civil servants below the age of 45 in 2021, those at 45 today still have about 12 years to retirement. The lack of significant withdrawals explains the exponential growth in terms of this fund.
Do you feel that one day we could have the PSSS as the largest pension scheme in the country?
NSSF is addressing a different segment of the market and is growing from its wider catchment of members. They also have the new tier II contributions and could in fact grow faster than the PSSS. Whether we will be the leading pension scheme or not, we are all running a different race but aiming to provide pension benefits to a wider population.
In terms of quantifying the benefit of the contribution scheme to the Exchequer, has the scheme met its main purpose of relieving the pension load on taxpayers?
It’s actually a move that should have come many years before. The change is however a move in the right direction and aligns to best global practice.
From where you sit, should the contributions be split equally between the employer/government and the employee to arrive at more gains for the exchequer?
At 7.5 percent (the contribution by the employees), we are not badly off because the allowable rate for the government should not be more than two times the employee contribution with a cap of 20 percent. The only way is to increase the employee contribution to 10 percent so that the government can contribute 20 percent of gross salaries.
What have been the challenges for the scheme even as we see its exponential growth?
The key thing for us is setting up systems. We want to move towards automation as you cannot manage all that data manually. We have already initiated the procurement of an enterprise resource planning system.
We’ve seen pension schemes underwater in the past year as high yields on government bonds inverse prices/bond values. The Retirement Benefits Authority (RBA) has issued guidance to revise reporting and distribution to members. For yourselves, what has been the impact of the falling bond values?
The notice from the RBA has been a big relief. As a contributory scheme, we have to do a distribution of interest declared. You would realise that your bond valuation has gone so low but in reality, you are holding the bond to maturity. With the RBA intervention, pension schemes can now distribute interest more realistically than on a mark-to-market basis.
What is your vision for the PSSS?
I see the PSSS as a transformative pension scheme in terms of meeting its promise to members and delivering a competitive return. We are always thinking of members’ funds and what we can do to grow them so that our members can get a reasonable replacement income at retirement.
The pension industry in Kenya now seems to have more bite with the enhanced contribution under both the NSSF and the PSSS, what do you think this does for the industry?
These contributions are a catalyst for not just the financial but also capital markets as this money will revolve around this market. It also stimulates other areas around alternative investments such as private equity.
For yourself, having held various roles in the industry, what outcomes would be dear to you down the line?
It gives me a lot of pride to work around professionals in this space. When I look at my journey, I can only see hope and potential. It’s a challenge but it gives me joy when I see the results at the end of the day.