NAIROBI - The Kenyan Government has appointed Hymans Robertson to advise it on restructuring the Civil Servants Pension Fund, the country's largest occupational pension plan.
The firm is to conduct an asset-liability study of the pay as you go plan, give advice on making it a funded plan and consider whether members should make contributions, according to sources close to the discussions, who asked not to be named.
According to local newspaper reports, the Kenyan government pays 5.6 billion Kenyan shillings ($71 million) a year from current revenue to cover annual benefits to plan members.
Funding the Civil Servants plan could yield large and potentially lucrative asset management contracts for local money managers that already have been scrambling to pick up assets following the country's recent pension reforms (Pensions & Investments, Sept. 17).
Sources said Hymans is expected to present its actuarial study of the plan to the government early next year. The plan is "by far the largest" in Kenya and covers around 400,000 active members and retirees, according to Chris Mwebesa, general manager at Stanbic Investment Management Services Ltd., Nairobi.
The government is still finalizing its contract with Hymans Robertson, said Sundeep Raichura, head of employee benefits for Hymans Robertson (Kenya) Ltd., Nairobi. He would give no further details.
The government issued the tender for an actuary after Sally Kosgei, Kenya's head of public service, raised concerns that paying the benefits of the growing number of retirees was stretching the government's ability to meet its pension obligations.
Employees do not currently contribute to the pension plan, but the actuarial study would consider this issue and also study whether the plan should remain as a defined benefit arrangement, according to published comments attributed to Ms. Kosgei.
Neither Ms. Kosgei nor James Ongwae, director of personnel management in the office of Kenyan President Daniel Arap Moi, would comment for this article.
Election poses problems
There is concern, however, among some local money managers, who asked not to be named, that the project might be derailed by the national election, which is expected some time next year. An election has to be called before November 2002 and it is unclear whether restructuring the civil servants' pension fund will remain a political priority in the runup to the election.
Local money managers are eager to get access to new pension mandates, as only a limited pool of assets is available for them.
The Retirement Benefits Authority so far has authorized 10 fund managers to manage assets for local pension plans and is considering applications from a few other plans, according to Edward Odundo, chief executive of the RBA.
Kenya's pension industry is estimated to be worth 144 billion shillings, but only around 50 billion to 60 billion shillings are up for grabs on the open market. The rest of the assets are held in the National Social Security Fund, which is managed by the Department of Finance. The Civil Servants Pension Plan is not included in current figures, as it is not funded. The plan also is not yet regulated by the RBA. Sources close to the discussions say this also will be an issue for Hymans Robertson to consider.
If the fund does fall under RBA regulation, its asset allocation will have to be within the investment guidelines set by the authority.
The current investment rules are: up to 70% of total plan assets in fixed income; up to 70% of total assets in quoted equities; up to 30% of plan assets in fixed deposits offered by banks; no more than 30% of plan assets in property; a maximum of 15% of plan assets in corporate bonds; no more than 15% of total assets in foreign securities; no more than 5% of total assets in cash and no more than 5% of plan assets in any asset class not previously specified by the RBA.
Hymans Robertson Kenya was set up in 1994 and is also actuary to the to the 1.1 billion shilling National Bank of Kenya Retirement Scheme, Nairobi.