A survey into framework for immunisation by retirement schemes in Kenya.
View/ Open
Date
2005Author
Kiwanuka, Patricia W
Type
ThesisLanguage
enMetadata
Show full item recordAbstract
Pension immunisation provides an attractive option to the trustees of retirement benefit
schemes as it provides them with a tool to control their financial risk as well as allows
trustees to target a given value of assets at the end of the investment horizon. An
immunisation strategy allows the trustees the peace of mind that they have locked in interest
rates hence maximising returns in a volatile market as well as providing them with the
flexibility to take advantage of market movements. .
Immunisation has been applied successfully in America and Europe in the late 1970s and is
currently being considered in South Africa. This study therefore sought to determine whether
the framework to support pension immunisation exists in Kenya and the potential challenges
trustees would face if they were to adopt the strategy in Kenya.
This study shows that to a large extent the framework to support immunisation exists m
Kenya since fund managers and actuarial consultants estimate the present values of the
investment assets and present values of the liabilities of retirement schemes. The study
reveals a number of potential challenges r at would need to be addressed prior to the
implementation of the strategy, which include the lack of depth in the Kenyan capital market,
turbulent economic fundamentals, extent of under-funding of many retirement benefit
schemes in the country as well as the limited actuarial consulting role prescribed in existing
legislation. The study funher reveals that fund managers and actuarial consultants work
independently and only consult on rare occasions. This calls for changes in policy to
establish a formalised link between the fund managers and the actuarial consultants on an ongoing
basis for successfully implementation of pension irnmunisation.
From the findings of the study, it is recommended that further studies be carried out into the
trustees appreciation of the concepts of immunisation. Separate studies on the potential
challenges identified in this study with a view of recommending possible solutions to them
for an immunisation strategy is to be deemed viable by the trustees may also be carried out as
an extension to this study.
Citation
MBASponsorhip
University of NairobiPublisher
University of Nairobi School of Business, College of Humanities and Social Sciences