Pension returns in the second quarter of the year dipped sharply as poorly performing equities weighed down on retirees’ assets at a time other classes failed to shine.
Industry analysis by Actuarial Services East Africa (Actserv) shows average returns for schemes stood at 0.1 per cent during the quarter, a steep drop quarter-on-quarter and year-on-year.
Pensioners had enjoyed a return of 6.7 per cent in the three months to March. The returns for the second quarter of 2017 stood at 8.9 per cent.
Share prices at the Nairobi Securities Exchange (NSE), which had rallied strongly in quarter one, have come down since the beginning of April on the back of foreign investor selloffs and reduced local investor participation.
“There was a drastic decline in the overall quarter return performance compared to the previous quarter. This was majorly driven by the decline in equities at -8.0 per cent compared to 14.8 per cent for quarter one. The offshore performance slightly improved from -1.8 per cent in quarter one to -0.5 per cent in quarter two,” said Actserv report for the period ending June 2018.
“Fixed income performance in the quarter dropped slightly from 3.6 per cent in quarter one to 3.5 per cent in quarter two. This was, however, the best performing asset class during the quarter.”
On an annualised basis, the overall return for pension funds stood at 13.5 per cent, having come down from a return of 22.2 per cent in the one year to March 2018, while the three-year return rose slightly to 10.6 per cent from 10.3 per cent in March.
Actserv surveyed 420 schemes with a total fund value of Sh723 billion.
While yields in the fixed-income market have remained fairly stable this year, the stock market has had a mixed performance.