Category Archives: pension schemes

UFAA: Snooze and Lose Your Investments: Part III

Kenya’s Unclaimed Financial Assets Authority (UFAA) is reminding companies that there is a  deadline of November 1 to surrender all unclaimed financial assets to the authority, and that failure to remit them will attract a penalty of 1% above prime rate per month per annum.

Earlier, there was a report that as at August 8.73 billion worth of assets had been surrounded, but that the UFAA was having difficulty finding the owners. 

An asset will be declared unclaimed where one or more of the following requirements are met:

  • The records of the holder do not reflect the identity of the person entitled to the assets;
  • The holder has not previously paid or delivered the assets to the apparent owner or other person entitled to the assets;
  • The last known address of the apparent owner is in a country that does not provide by law for passage of property to the State where there is no owner or is not applicable to the assets and the holder is a permanent resident in Kenya.

Some unclaimed assets include items left in safe deposit boxes (after two years), unclaimed salary (after one year), ownership interest, dividends (3 years) and deposits after utilities (like Kenya Power after 2 years). Some unclaimed assets are created by red tape by stubborn custodians who have made it difficult for people or companies to rightfully claim their own assets.

 

State of Kenya’s NSSF

Kenya’s National Social Security Fund (NSSF) published their financial accounts in the newspapers last week after they were earlier gazetted.

The Kshs 174 billion statutory fund, had income in the year to June 2016 of  Kshs 10.7 billion which was down from 19.3 billion the year before. The was after the fund received 12.8 billion of contributions from members (up from 11.7 billion) and paid out 3.1 billion. They had investment income of Kshs 12.8 billion, and paid administrative expenses of Kshs 5.5 billion leaving a surplus for the year of  Kshs 5.2 billion, and which was down from 13.2 billion in 2015.

In terms of assets, they have quoted shares of Kshs 49 billion (down from 57 billion in 2015), treasury/infrastructure bonds of 52 billion, 8.9 billion of corporate bonds, undeveloped land of 9 billion and buildings/ land of Kshs 19.9 billion.

Top shares in the NSSF Kshs 49 billion quoted investments portfolio include 25 million EABL shares (worth 6.9 billion shillings), 320 million Safaricom shares worth 5.6B, 116 million Britam worth 5.6B, 185 million KCB shares worth 6.2 billion, 88 million Equity Bank worth 3.4 billion, 3.2 million BAT worth 2.6 billion and 56 million Bamburi Cement shares worth 9.6 billion. NSSF also owns 24 million EAPCC shares worth Kshs 868 million and 148 million National Bank (NBK) shares worth 1.4 billion.

In the 1990’s the fund was sold illiquid plots at inflated prices and in the 2000’s, it deposited some funds in shaky banks that collapsed soon after. They still have a few issues with land, and the undeveloped land assets of the NSSF include 3.2 billion worth of plots at Mavoko and a Kshs 3.5 billion plot on Kenyatta Avenue in Nairobi.

The NSSF accounts were audited, by the Office of the Auditor General of Kenya (OAG) who qualified the accounts of the fund owing to some issue including

  • Unremitted contributions; A sample of 20 employers found that they had not remitted Kshs 755 million of deductions to the NSSF.
  • Another 764 million of contributions were held in suspense accounts.
  • Hazina Plaza/Polana Hotel Mombasa had rent owed to the NSSF of 239 million.
  • Milimani Plots at Kisumu where a Kshs 178 million estate that brings no income.

Other issues flagged included:

  • The stalled Hazina Trade Centre in Nairobi, which remains 38% complete with construction having been halted after Nakumatt Supermarkets who have a branch in the building had refused to give the contractor (China Jiangxi) access to the basement where they were to provide reinforcement to pillars of the building. The OAG recommended that the NSSF take legal action against Nakumatt in order to complete the Kshs 6.7 billion construction.
  • NSSF new rates

    NSSF budgeted income for the year was  Kshs 44 billion, but only 10.8 billion was raised; This was partly due to poor performance of the portfolio of shares listed at the NSE, but also due to non-implementation of changes to the NSSF act which would have seen increased contributions from members into the scheme.

  • Illegal transfer of a plot of land from the NSSF to Kenya’s Judiciary, and works at Nyayo estate at Embakasi.

$1 = ~Kshs 100

Choosing a Pension Plan

 

Whether you’re formally employed at a bank or large company, a factory worker, tenderpreneur, SME/ business owner, matatu guy, farmer etc. it really doesn’t matter what you do as long as you choose a pension plan, and start investing and saving as soon as possible.

If you want to retire with money you need to pick a financial partner. You are probably in some investment fund, but is it a pension fund? RBA registered pension plans usually have the words pension or retirement in the name. Also avoid insurance companies because they try and enhance these with other insurance benefits and it gets confusing, and takes away from the simple nature of retirement.

Collectively, at the beginning of the year, there were about 162,000 Kenyans who had placed about Kshs billion saved in individual plans. RBA had registered 43 retirement schemes for  individuals from providers such as Alexander Forbes,  Amana, Apollo, British American, CFC, CIC, Co-op Trust, Eagle Africa, GA Life, ICEA, Kenindia, CPF, Octagon, Old Mutual, Sanlam, UAP and  Zimele.

These are almost all standard and they give members annual statements and hold annual general meetings to brief members on how the funds are performing. Also:

  • Depending on your current income, you may want some flexibility in terms of a plan that allows irregular deposits, had affordable investments and allows payments by standing order or mobile money (m-pesa)
  • One important consideration is also the cost of the fund e.g. Zimele quotes 2.5% per year for the personal pension plan and 2% for their guaranteed pension plan. Check with any plan what the cost is, and avoid those who charge an upfront cost for joining (if any).
  • Many of the insurance ones give the option of a guaranteed return or a higher one that depends on the market. As of 2015 pension industry fund assets were invested in government bonds (30%), followed  by quoted securities (23%),  then property (19%).
  • Many allow employers to co-invest with their employees, effectively doubling their retirement savings every month.
  • There was a time when the minimum to join was about Kshs 5,000 but now the minimum for many (other than Mbao) is Kshs 200 or 500 per month. This makes them easy to join, but remember you will harvest what you invest, and this amount should be increased as s high as, and as soon as possible. There’s tax relief on pension savings of up to Kshs 20,000 per month in Kenya.

So which ones to pick? Here are 5 picks in no particular order:

mbao-application-is-simple

It’s simple to apply for a pension plan

  1. Blue MSMEs Jua Kali Individual Retirement Benefits Scheme (More on the Mbao Pension Plan under which one can save as little as Kshs 20/=). According to RBA, Mbao is has the largest membership of about 75,000 members; its big attraction is its informality.
  2. Jubilee Insurance Personal Pension Plan. This is th largest individual plan in terms of assets, and its 17,000 members have saved over Kshs 7 billion.
  3. Alexander Forbes (Vuna Personal Pension Plan) (I use this one)
  4. Octagon Personal Pension Scheme: No, minimum, savings, and gets 10% a year with an income draw down option.
  5. UAP Life Assurance Individual Retirement Benefits Plan. This pension can be combined with life assurance so that on premature death, combined benefits of accumulated savings and life assurance becomes payable.

This is part of an ongoing series on retirement, dubbed Kulegalega, with the Retirements Benefits Authority.  

$1 = Kshs 101

How to Secure Your Retirement

The last few years have been very trying to many retirees and their future is still in limbo. Some had their retirement funds that were in banks that collapsed, some bought insurance policies in companies that have had difficulties making payments on matured policies.

The Retirement Benefits Authority (RBA) oversees 1,000 individual schemes at companies and 40 others that are available to individuals (PDF) to the public. It’s important to note that insurance policies are not all retirement plans. Some insurance companies have RBA-approved  retirement schemes, but they usually have “retirement” or “pension” in the names. Any other may not have the features and protections for retirees. The goal at the RBA is to secure funds for retirees have them  invested and be paid as and when they are called for to pay retirees . They do this through licensing a network of professional companies to operate retiree plans, and an RBA-licensed scheme relies on a system of checks and balances with separate roles of different players . The players include:

old-truck

  • Trustees; who manage schemes for retirees best interests of the beneficiaries,
  • Fund Managers: who prudently invest funds to grow
  • Custodians: Hold documents for the retirees fund
  • Administrators: who keep records and communicate with members
  • Actuaries

For the first two decades after independence, corporates jobs had assured retirements. They were defined as permanent and pensionable. Companies invested in their employee’s retirement and the amounts to be paid out at retirements (defined benefits) were guaranteed.

But those jobs are no more. These days if companies have pension schemes they are all defined contribution – what an employee sets aside to save and invest is what earns him/her funds when they retire, or even if you need a portion of it before retirement age e.g. for a mortgage.

The statutory retirement body, the National Social Security Fund has a long chequered history. But through working with the RBA they have moved towards becoming  a proper pension body with the most important steps being that they have appointed independent custodians and investments managers. The days when most of their portfolio was in questionable land or members funds collapsed with stockbrokers or weak banks should now be behind them now. But NSSF has just 1.7 million members and over Kshs 165 billion in assets as at June 2015. And in a country of 43 million people, if half of them are under the age of 18, it still means there are  a few million working adults who probably have no pension plan for themselves who will one day get old and wonder who is going to take care of them

There are many plans all over, that allow different payments or levels of investment, and some are even shariah compliant schemes. Take up one of them. Don’t #kulegalega

If you have any questions are retirement benefits in Kenya, send an email to bankelele@hotmail.com

Snooze and Lose Your Investments: Part II

Centum Investments, which recently announced a record profit, and the end of a seven-year deliberate dividend drought, has been running ads in the newspapers and online, asking shareholders to register their names & details via SMS to ensure that they get their payments on time.

At the same time, Centum has also published a list (PDF), on its website, of shareholders who have not claimed their dividends. The list has about 9,000 names, and that’s a shocking stat, considering that Centum  has about 37,000 shareholders.

No shareholder likes to lose out on a dividend or an investment. And regular shareholders who attend AGM’s have also been aware about resolutions at companies to comply with a legal requirement to  surrender unclaimed assets, including dividends, to the government.

Almost all large public companies, except those which listed recently, list & highlight their liability from unclaimed dividends (owed to shareholders) for many years in their annual reports. But if 25% of Centum shareholders, have not claimed their dividends, totaling Kshs 78 million after almost 8 years, it raises many questions about why this situation exists. But one reason could be that shareholders have been unable to receive their dividends because some companies and their registrars have made it very difficult for shareholders to prove, claim and receive their rightful dividends. lost shareholders

  • $1 = Kshs 100
  •  A  registrar is an institution,  responsible for keeping records of shareholders..and  when an issuer needs to make dividend payment to shareholders, the firm refers to the list of registered owners maintained by the registrar.
  • Centum ads say the registration is free, but normal SMS costs seem to apply.