The big question that is being debated worldwide and has entered the local scene is: Should pension scheme trustees be remunerated beyond the usual board meeting allowances that they generally receive?
A recent study by Enwealth Financial Services on the issue elicited diverse views. Some people responded with an outright ‘No’, arguing, generally, that pension trustees were, in essence, volunteers. Some respondents appeared caught by surprise and opted to stay in the middle. Others said a big ‘Yes!’
Of the trustees surveyed, 88 per cent believe they should be remunerated.
Circumstances in Kenya’s pension environment present a case for recognition of the role that individuals who volunteer their time, expertise and experience in oversight of pension funds as trustees, whether through remuneration or other forms of awards, for their service.
While the work that they do is by no means little — entailing financial stewardship and promotion of compliance, investments, accountability, communication and risk management in addition to administrative responsibilities — the demands for their contribution are about to multiply.
The local pension industry has expanded quite rapidly with signs of further growth. Over the past 10 years, national pension fund assets have grown five-fold to total more than Sh900 billion in worth. Also, the average pension fund value per scheme rose from Sh100 million to Sh500 million.
With more employers coming to the realisation that retirement benefits cannot be ignored if they are keen to attract and retain talent, these figures can only go up.
More occupational retirement benefit schemes are coming up. Also, the gazettement, in March, of 2017 Umbrella Retirement Benefits Schemes Regulations will see more employers join the fold.
Umbrella retirement benefit schemes enable small and medium enterprises and small NGOs previously discouraged by the rigors and costs to join with ease.
The umbrella schemes allow several employers to pool their employees savings and benefit from shared administrative and management costs.
These may be established either for employers within an industry, trade, profession, group, association or county, or even those who do not have any commercial or professional relationship with each other.
With these developments, Kenya’s economy is staring at a pension industry destined for an explosion of growth. The envisaged vibrancy and competitiveness will, no doubt, require greater involvement of trustees to serve the interests of their members more adeptly.
This is even more so as the workplace dynamics of the current century present unique demands in terms of the design of effective and relevant employee retirement schemes.
More are opting to take the form of defined contribution schemes, where members, and not the employers, bear the risk of adequacy of pension funds on leaving active work.
Trustees of such pension schemes are tasked with ensuring that funds are invested in such a way as to secure competitive returns.
The average scheme has, thus, shifted from simply placing all its funds in government securities to active investment management. This calls for greater research and analysis of the market, as well as effective governance and risk management, with the support of the fund administrator and the fund manager. Nonetheless, trustees retain overall responsibility in oversight.
Much as the legislation provides for the delegation of pension fund management duties to duly registered professionals — such as custodians, administrators and fund managers — it does not absolve trustees from the overall responsibility of decision making and governance as outlined in the Retirement Benefits Act.
The study by Enwealth shows that trustees generally earn sitting allowances: On average, just about Sh8,200 per sitting for the statutory board meetings in a year.
Note that the Retirement Benefits Authority (RBA) recently directed that trustees shall sit for at least two board meetings a year.
Any other contributions trustees make outside the board meetings go without compensation or even recognition by their employers yet their service will increasingly be required beyond attending statutory board meetings.
The increased pressure places a higher demand on the trustees and it is time we discussed their remuneration objectively with a view to putting in place policy guidelines. Stakeholders ought to discuss how to attract talent in managing pension funds.