The Effect of Firm Characteristics on the Financial Performance of Pension Schemes in Kenya

Abstract

The performance of pension schemes is imperative as they play a very significant role in the economy of any country. Countries throughout the world are increasingly relying on individual pension savings accounts to provide income replacement in old age for their citizens. Although these have now been in place for several decades, the attributes of their performance has not always been meaningful from the perspective of the long term objectives of pension schemes. The present study thus attempted to establish the effect of firm characteristics on financial performance of pension schemes in Kenya. More specifically, the study sought to determine the effect of membership age, fund size, fund design and density of contribution on the financial performance of pension schemes in Kenya. The study was conducted through the use of a descriptive survey design. The target population for the study comprised all the 1216 registered pension schemes in Kenya as per the Retirement Benefits Authority (RBA). A sample size of 134 registered pension schemes was reached sampled on a simple random sampling technique. The study used secondary data, which was quantitative in nature and was collected from the annual financial statements of the pension schemes in the custody of the Fund Managers, Scheme Trustees, Scheme Administrators and RBA as filed returns. The data to be representative enough, the study reviewed secondary data for a five year period, preferable latest, that is, 2009-2013. The quantitative data collected was analyzed by the use of both descriptive and inferential statistics using statistical package for social sciences (SPSS) version 20. There were strong, significant and positive correlations between ROI and: Density of contributions, Fund value, Fund size, and Fund returns. Weaker, significant and positive correlations were established between ROI and Fund design and Age.