The relationship between trustee compensation and financial performance of retirement benefit schemes in Kenya

Abstract

This study sought to study relationship between trustee compensation and financial performance of retirement benefit schemes in Kenya, over time, during a study period of between 2011 through 2014. The board of trustees is the key decision makers pertaining to investment benefit scheme fund. They make investment decisions and invest the schemes funds in an array of investment vehicles ranging from property, government securities, quoted shares, unquoted shares, corporate bonds, offshore investments, guaranteed funds among many others and declare income rate at the close of specific period, usually per annum. The study adopted a descriptive survey research design with a sample size of 89 retirement benefit schemes, data secondary in nature, was drawn from the RBA. Systems analysis involved averaging returns and fund value across the 5 years for each schemes’ fund and calculating the average rate of return by dividing the results respectively. The study conducted inferential analysis using pearson correlation coefficient, ANOVA and regression analysis. ANOVA was used to test the hypothesis of the means among independent (trustee compensation) and dependent variables (financial performance). Correlation coefficient was used to test the relationship and the strength of association between the variables and regression analysis (coefficient of determination) was used to measure how well the regression line represents the data. The study found evidence of a positive relationship between trustee compensation and financial performance of retirement benefit schemes in Kenya in that as the value of trustee compensation increases, financial performance increases as well. However this study propose further studies on this area especially for the schemes that hop trustees; also suggest including the cost factor in the analysis. Also look at other factors that affect returns and not only the excess market return, the size factor and the book to market factor. Future studies should be conducted to assess effectives of investment undertaken by the pension schemes and if such investments have positive impact on the financial status of the members of the scheme.