Pension returns doubled to 18 per cent last year as soaring equities boosted fund portfolios, a new industry survey shows.
The 2017 full-year pension research by fund administrator Zamara shows that average returns for schemes from equities investments hit 30.4 per cent last year compared to -9.6 per cent in 2016 when the market was in the grip of a bear run.
Returns from fixed income and offshore investments also hit double digits last year at 14.7 per cent and 22.2 per cent respectively, up from 14.3 per cent and 1.2 per cent in 2016.
The higher overall returns last year — which was double the eight per cent recorded in 2016 — also meant that pensioners managed to beat inflation which averaged 8.01 per cent by some distance.
“All schemes equity medium return outperformed the NSE 20, NASI and FTSE 25. There was a significantly large range in equity returns over the one-year period, this was due to some schemes with exposure to very limited stocks,” said Zamara in the survey.
“Fixed income returns outperformed the average 364-day Treasury bill… and offshore median returns outperformed the MSCI World index.”
The good returns come as a relief for employees laid off over economic stagnation toward the end of 2017, who will now have a better pension take-home.
In 2017, the NSE 20 Share Index was up 16.5 per cent, and the NSE All Share Index by 28.4 per cent. Large blue chips like Safaricom and KCB led the market’s recovery, posting gains of 40 and 48.7 per cent in share price during the year.
In the fixed income segment, interest rates on government securities remained largely flat during the year, partly as a result of the Central Bank of Kenya’s (CBK) refusal to accept expensive money from the market in the primary auctions.
The asset allocations, however, remained largely in favour of fixed income (largely government securities) which accounted for 70.1 per cent of total assets.
Equities accounted for 24 per cent, property 4.3 per cent and offshore investments 1.6 per cent.
At the end of 2016 fixed income investments accounted for 74.9 per cent, with equities at 19.6 per cent. Property and offshore investments accounted for 4.5 per cent and one per cent respectively.
Zamara polled 374 schemes in the survey, with a total of Sh677 billion in assets under management.