The Effect of the Retirement Benefits Act (No.3 of 1997) on the Management of Insured Retirement Benefits Schemes in Kenya

Abstract

This survey provides a critical analysis of the effect of the Retirement Benefits Act (No.3 of 1997) on the management of insured retirement benefits schemes in Kenya. The rationale of the study is to address the various issues raised by the insurance companies regarding the effect of the Act of 1997 and subsequent regulations on the management of insured retirement benefits schemes. The population consists of 19 insurance companies underwriting retirement benefits schemes and 3 brokerage firms. The primary data from structured questionnaires was analyzed using descriptive statistics. The study shows that 64.3% of the insurance companies managing the retirement benefits are locally owned. Within the different types of retirement benefits arrangements, 57% of the companies were operating the defined benefits schemes as opposed to defined contribution, and 71% of the companies managed contributory as opposed to noncontributory schemes. The results and responses given by the respondents agreed that the enactment of the RBA Act brought about major positive changes to the industry, The percentage for the responses on specific changes were as follows: Fees 71.4%, Services 71.4% Reporting of accounts 92.90/0, Returns to RBA 92.9%, Fund management and custodial services 85.7%. One of the most negative aspects of the Act was the increase in costs of setting up and operating schemes. The stakeholders in the industry, namely, the Retirement Benefits Authority, the Commissioner of Insurance, and the Capital Markets Authority should look for ways of bringing these costs down.