The Effect of Fiscal Policy on Financial Performance of Pension Schemes in Kenya

Abstract

The number of people participating in pension schemes, as well as the value of their holdings, has increased dramatically in recent decades. There are now around 1200 registered schemes, with over 1.7 million participants. The industry's asset base has expanded both quantitatively and relative to GDP. The schemes provide investment policies to RBA as guided by the investment guidelines in terms of providing limits to the varying assets classes. The macroeconomic environment in which the retirement benefits schemes operates and the two macroeconomic policies, namely monetary and fiscal impact the performance of the investments of the pension schemes. The study's goal is to evaluate the impact of budgetary allocations on the sustainability of Kenya's pension programs. The main purpose of this study was to evaluate the effect of macroeconomic factors on the sustainability of Kenya's pension systems. A descriptive survey approach was used for this study. All 81 pension programs in Kenya were accounted for in the study. Secondary data sources included the RBA, Kenya Revenue Authority, corporate financial statements, and the Kenya National Bureau of Statistics (KNBS) for the monthly period spanning 2017-2021. The financial accounts of pension systems in Kenya were analyzed to collect data on the dependent variable, financial performance. The Kenya National Bureau of Statistics provided information on the country's trade surplus, public debt, and government spending; the financial statements of individual businesses provided information on operating expenses and liquidity; and the Kenya Revenue Authority provided information on taxation. Using SPSS version 20, both descriptive and inferential statistics were used to the gathered quantitative data for analysis. According to the findings of this research, the success of pension programs in Kenya is closely tied to the government's budgetary stance. R Square for the independent variables of the research (Kenya's trade balance, government spending, government debt, taxes, operational expenses, and pension scheme liquidity) was 0.645, suggesting that these factors explain 64.5% of the variation in performance. The overall significance of the regression analysis indicates that the investigated business characteristics considerably impact the financial performance behavior of pension funds. More research on the factors that affect the financial success of pension plans throughout the country is required.