The impact of risk based supervision on the financial performance of pension funds in Kenya

Abstract

Over the years, it has emerged that most pension schemes have not been keen in risk management. However, current trends in developed countries have inspired developing countries to consider various reforms aimed at improving the management of their pension funds thus leading to improved performance. A focus on outcomes and risks rather than rules, has clear resonance with the search for better regulation. This insight led to the launch of Risk Based Supervision by the Retirement Benefits Authority and consequently its adoption by the Retirement Benefits Sector in Kenya in 2011. This study sought to establish the impact of Risk Based Supervision on financial performance of pension funds and the effectiveness of its implementation. A sample of 50 pension schemes was drawn from a population of 500 pension schemes that met the pre-defined criteria for study data. Primary data was obtained from fund administrators and principal pension officers. Secondary data was obtained from RBA and Fund managers of various pension schemes. Primary data was analysed using Ms Excel and secondary data was analysed using SPSS Statistical Package. Total contributions and fund values for each of the sampled schemes for each of the quarters before and after implementation of RBS were analysed.