Capital Markets

Pension savings grow at slowest rate since 2015

RBA

RBA chief executive Nzomo Mutuku. FILE PHOTO | NMG

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Summary

  • Pension savings grew at the slowest pace in five years in 2020 on the back of the Covid-19-induced job losses that sparked suspension and withdrawal of contributions.
  • The Retirement Benefits Authority (RBA) brief for December 2020 shows that assets under management grew by 7.7 percent to Sh1.39 trillion from Sh1.298 trillion in the previous year.

Pension savings grew at the slowest pace in five years in 2020 on the back of the Covid-19-induced job losses that sparked suspension and withdrawal of contributions.

The Retirement Benefits Authority (RBA) brief for December 2020 shows that assets under management grew by 7.7 percent to Sh1.39 trillion from Sh1.298 trillion in the previous year.

The growth is down compared to 11.3 per cent a year earlier, and was the slowest since 2015 when retirement benefits grew by 3.3 per cent.

RBA chief executive Nzomo Mutuku said last year most  workers who lost their jobs tapped into their savings to make ends meet, contributing to the slowed growth in assets.

“It was a difficult year. We had companies closing down, retrenched staff who were taking money from the system and some companies suspending contributions,” said Mr Mutuku.

The regulator had relaxed several conditions last year including allowing distressed companies in sectors such as aviation, manufacturing and hospitality to suspend retirement contributions.

Covid-19-induced economic downturn had seen an estimated 1.72 million workers lose jobs in three months to June last year as companies reacted to a sharp fall in revenues through layoffs and salary cuts.

About 44 schemes had by between April and September last year suspended their pension contributions following the outbreak of the infectious disease, with RBA projecting Sh2.2 billion to be lost.

Mr Mutuku said that many of these schemes in sectors such as education and hospitality had resumed contributions in the first quarter of this year on gradual economic recovery.

However, Mr Mutuku cautioned that the fresh containment measures introduced to stem the spread of the third wave of coronavirus looks set to erode this progress.

“We were very optimistic but with the new lockdown, we have to give it time to see how it will evolve,” said Mr Mutuku.