Impact of Retirement Benefits Authority Reforms on Financial Performance of Pension Firms in Kenya

Abstract

The Retirement Benefits Authority has been at the fore front of pension reforms in a bid to improve the pension sector. The study sought find out the effect of RBA reforms on financial performance of pension firms in Kenya. This study employed a descriptive research approach. Total of 518 pension schemes that were registered before the RBA Act 2007 were targeted. A sample of 50 randomly selected pension schemes were used for analysis. The research employed both primary and secondary data for its data analysis .For primary data, questionnaires were distributed to the 50 middle level managers of RBA registered pension firms. Pretesting with five randomly chosen respondents established the questionnaire's face validity. Quantitative data techniques were used in this study. The study concludes that innovation influences financial performance of pension funds in Kenya. This comes from alignment of the current innovations to the strategic goals of their pension firms. This is also based on the fact that the benefits of innovation have outridden the costs of innovation. This shows that innovation has a net positive effect on financial performance of pension funds. The analysis shows that, change in pension model influenced financial performance of pension funds. This is due to the contribution of innovation on the current financial performance to pension model. The benefits of the new pension model outride the costs of regulation which supported conclusion that change in pension model influenced financial performance of pension funds. The new pension models provided better benefit retention within the pension funds. From the analysis, fund value had a negative and significant effect on financial performance of pension funds. However, lump sum had a positive and significant effect on financial performance; fund contributions had a positive and significant effect on financial performance; while membership age had a negative and significant effect on financial performance. The study recommends that RBA undertake regular reforms within the pension funds in order to enhance the financial performance of pension funds.