A Survey Of The Agency Problems And The Resolution Mechanisms Among Pension Schemes In Kenya
Njuguna, Geoffrey K
Njuguna, Geoffrey K
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This study sought to find out, the agency problem in pension schemes in Kenya. The objectives of the study were to determine agency problem in the management of pension schemes in Kenya and to examine the mechanisms used to resolve the agency problem in pension schemes in Kenya. The research used a descriptive survey method. The target population of the study was all pension scheme members, all pension schemes and fund managers registered by Retirement Benefits Authority (RBA) in Kenya. Simple Random Sampling technique was used to select Thirty Five (35) pension schemes out of the 1,359 registered schemes as per RBA financial statements for the year 2007. In addition, the sample comprised of all the sixteen (16) investment managers. One member of the board of trustees was administered with the questionnaire from each selected pension scheme. For each fund manager, one manager was administered with the questionnaire. Further, one hundred and forty (140) members of pension schemes were administered with the questionnaire. Data was collected using three sets of semi-structured questionnaires. A total of 150 respondents responded positively out of the total sample of 191 giving a response rate of 79%. Data was analysed through descriptive statistics and presented in tabular and graphical formats. The respondents mentioned a number of problems in respect to the agency problem; principal among them being poor annual general meetings (AGM) attendance, lengthy time of decision making, delay in remittance of pension contributions by pension schemes‟ sponsors, and poor investment of pension schemes‟ funds by fund managers. Other challenges faced include; delay in producing members‟ statements, lack of information from service providers, and lack of adequate investments knowledge by trustees. The respondents proposed various ways to resolve the agency problem and these include; provision of information on their rights and benefits as members of pension schemes, regular reporting as well as frequent consultations between members of board of trustees, and investment managers. In addition the respondents proposed stringent monitoring of the pension schemes x activities by the government through its regulatory agencies to check on pension schemes that do not follow the laid down rules and regulations. It was further recommended that the right procedures should always be adhered to in arriving at any decision. Agency conflict in organisations should be minimized at all times and from the research, it has come out that there are various ways in which this could be achieved in pension schemes. These include regular consultation with all stakeholders to gather views on how to improve the scheme, regular consultative meetings other than the AGM, recruitment of competent officials (members of board of trustees) in office, as well as investing in less risky investments. It is also important that the laid down rules and regulations and other legal requirements are followed to the letter. The board of trustees should also meet frequently as well as consult widely with other pension schemes‟ boards of trustees. Investment policy used by pension schemes should also be availed to all members so that they are well informed. From the study, I recommend effective supervision of pension schemes. RBA should develop plans which focus on legal compliance, financial control, and supervision of managers. RBA and other regulatory bodies should be properly staffed and funded to enable them to deal with their regulatory and supervisory powers in order to conduct when necessary off and on site supervision of pension schemes and, and in particular when problems are reported. Further, investments by pension schemes should be adequately regulated. Increased reliance on modern and effective risk management, industry-wide risk management standards for pension funds and other institutions involved in the provision of retirement income should be promoted. In addition, RBA should promote and enforce appropriate disclosures by pension schemes to ensure that all the stakeholders and especially the members are well informed. Members and beneficiaries should be educated on prudent management of retirement benefits. Also, fees structure, pension schemes‟ performance and benefits modalities should be disclosed frequently to all the stakeholders.
University of Nairobi
RightsAttribution-NonCommercial-NoDerivs 3.0 United States
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