Capital Markets

Pension schemes earnings fall to 2.5pc in first quarter

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Zamara chief executive Sundeep Raichura. FILE PHOTO | NMG

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Summary

  • The average returns for pension schemes in the first quarter of the year dropped compared with previous period, hurt by soft performance of fixed-income investments.
  • Analysis by fund administrator Zamara shows returns in three months through March averaged 2.5 per cent compared to 3.0 per cent in the previous quarter ended December 2020.

The average returns for pension schemes in the first quarter of the year dropped compared with previous period, hurt by soft performance of fixed-income investments.

Analysis by fund administrator Zamara shows returns in three months through March averaged 2.5 per cent compared to 3.0 per cent in the previous quarter ended December 2020.

The returns were, nonetheless, an improvement from negative 4.2 percent in the same quarter of 2020.

The findings are based on performance of 421 schemes which manage a portfolio of Sh868.8 billion, an equivalent of 62.5 per cent of pension industry’s Sh1.39 trillion total assets as at end of last year.

“The decline in performance (returns) has been attributed to the lower performance in fixed income reflected by the rising yield curve,” analysts at Zamara said in the quarterly report.

The median returns for the first quarter underperformed average inflation for the review period which stood at 5.79 per cent, meaning the returns on savings by retirees were wiped out by the rise cost of living in real terms.

Investment in equities generated the highest returns for retirement schemes in the three-month period, averaging 5.7 per cent. This was against 3.4 per cent gain by Nairobi Securities Exchange’s (NSE’s) 20-Share Index — a measure of returns for blue-chips— largely boosted by performance of Safaricom and banks.

Fixed-income assets, on the other hand, earned the schemes 1.7 per cent return on average against 6.8 per cent average yield for three-month Treasury bills. Investments in assets abroad returned a negative 1.9 per cent as the Covid-19 containment measures continue to roil global markets.

The retirement savings were largely concentrated in fixed-income assets which accounted for 72.5 per cent of the funds on average for schemes covered in the Zamara survey, slightly reduced from 72.8 per cent last December.