A survey of the extent of compliance with the retirement benefits act by retirement benefits schemes in Kenya

Abstract

This survey provides a critical analysis of the extent to which Retirement Benefits Schemes in Kenya comply with the Retirement Benefits Act. The rationale of the study is that not all schemes fully comply with requirements of the Act and to analyze the relationship between the level of compliance and financial performance of the schemes. The population consists of 1,380 established retirement benefits schemes. The secondary data from the Retirement Benefits Authority was analyzed using descriptive statistics. The results show that the compliance rate is about 10% and 90% of the compliant schemes are the defined contribution schemes. At a 95% level of statistical significance, the relationship between the extent of compliance and financial performance of retirement benefits schemes is not significant. Hence, the null hypothesis: "The extent of compliance of retirement benefits schemes in Kenya with the Retirement Benefits Act does not significantly influence the financial performance of the retirement benefits schemes," is accepted. The study shows that the difficulties faced by the schemes in complying with the Retirement Benefits Act include: Unremitted contributions, increased costs, short notice to comply, low literacy levels among the trustees, legislative restrictions, and conflict of financial year end, poor administrative procedures and interference from the sponsors/ trustees. On specific compliance issues, the defined contribution schemes perform better than defined benefit schemes exceptin provision of audited accounts where 90% of the defined benefit schemes are compliant compared to 72% of the defined contribution schemes. The study further shows that the disparity in complying with audited accounts can be attributed to the defined benefits sponsors' direct responsibility as opposed to the defined contributions schemes.