Retirement Fund Characteristics and Financial Performance of Pension Schemes in Kenya.
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Date
2022
Authors
Ondieki, Nelly Winny Nyanchama
Journal Title
Journal ISSN
Volume Title
Publisher
Kenyatta University
Abstract
Pension schemes play a vital role in how individuals plan for retirement. Saving for retirement is
key as it determines how one’s life is after they cease being employed. Individuals should plan to
save for their retirement once they are employed to avoid situations where they have little
income to support themselves. The performance of pension schemes is highly momentous noting
the associated value to members and the country at large. Pension schemes have been fluctuating
over the past ten years and thus could be attributed to the inflation and other crises experienced
in the country. This has led to fluctuations in the return on assets received by the schemes as
some years have had negative returns after investments prompting the funds to issue minimal
benefits. In addition, some of the last years have experienced negative returns which creates a
worrying trend as most of the individuals save for retirement to receive better benefits. Several
factors such as the financial crisis in 2008 had a negative impact on the returns realized and the
negative results influenced the benefits. It is key for the pension schemes to invest in worthy
investments for them to maximize on the returns they make. It is in those regards that a study
touching on the pension fund performance is highly imperative in providing critical insights
regarding how benefits can be certainly maximized. Although empirical studies have be
conducted in other parts of the world showing how retirement funds characteristics have an
impact, effect to the test the same in Kenya is still scanty. This study sought to examine the effect
of retirement funds characteristics on the financial performance of pension schemes in Kenya.
Specifically, the study sought to establish the relationship between asset allocation, fund size,
fund design plans and the social coverage span. The relationship was proposed to be moderated
by the retirement benefits act regulations. This study used a descriptive study design. The
population comprised of all the 1342 registered pension schemes and a purposive sampling was
conducted to select schemes that have been consisted for the last ten years. 31 schemes were
selected which had consistent data for the past 10years. Secondary data used which was sourced
from the Retirement Benefit Authority and the company’s websites and the results presented
using SPSS version 24. The study findings were presented in tables for easy interpretation. The
results showed that asset allocation, fund size, and fund design plans had a positive impact on the
financial performance of the pension schemes. However, social coverage span had a nonsignificant effect on the financial performance of pension scheme. The results also showed
regulations had a significant moderation effect on the relationship between asset allocation, fund
size, and fund design plans and financial performance of pension schemes. However, it had a
negative effect on relationship between social coverage span and financial performance of
pension schemes. The study recommended pension schemes should efficiently invest their assets,
adopt the use of defined contributory plans, and increase the value of their funds as a way of
increasing their returns.
Description
A Thesis Submitted to the School of Business in Partial Fulfilment of the Requirements for the Award of Master of Science Degree in Finance of Kenyatta University
Keywords
Retirement Fund, Characteristics, Financial Performance, Pension Schemes, Kenya.