Effect of Selected Internal Factors on the Performance of Occupational Pension Schemes in Kenya

Abstract

Pension Industry contributes directly to the economy through reduction of old-age poverty and financial market development. The social objective of the pension schemes is provision of an acceptable living standard for its members when they retire. Upon retirement, majority of the population depends on pension income from the schemes. Investment returns for pension schemes therefore is important since it affects several stakeholders in the economy. The objective of this study was to determine the effect of selected internal factors on the performance of OPS in Kenya. The dependent variable was performance of the pension schemes measured by ROA while the independent variables were fund value and investment. Fund investments specifically focused on investment in guaranteed funds, equities and immovable property. Descriptive research design was used in the study and the population consisted of 1,168 OPS registered with RBA as at December 2018. Data was sampled randomly, and 60 schemes were selected for review. Secondary data was utilized in the study. The findings revealed a weak positive correlation of 0.21 between the study variables. Further, the finding revealed a positive relationship between investment in equities and immovable properties with coefficients of 0.0355 and 0.0302 respectively. Fund value and investment in guaranteed funds however, had a negative and weak impact on performance with coefficients of -2.344e-12 and -0.0077 respectively. This therefore implies that changes in fund value does not have a significant impact on fund performance. The study recommends that RBA should educate BoT on optimal asset allocation to ensure that they maximize returns while minimizing risks. RBA should also come up with policies to govern schemes investments in various asset categories.