NSE share rally boosts pension fund returns

Pension subscribers have begun reaping the benefits of a recovering equities market that has now boosted average returns for schemes above the rate of inflation.

An industry survey by Actuarial Services East Africa (Actserv) for the quarter ending June shows that the average return for schemes rose to 8.1 per cent from 2.5 per cent in the first quarter, buoyed by a jump in returns on equity investments to 18.3 per cent compared to 0.2 per cent in quarter one.

The NSE has been on the upswing since the end of March, with the NSE 20 share index gaining 26.1 per cent and the NSE all-share index up 29.5 per cent.

This has helped the schemes beat the 1.3 per cent increase in inflation over the three month period, indicating that the fortunes for pensioners may be changing after two difficult years when their returns were being eroded through falling below inflation.

“The high equity returns during the quarter have significantly enhanced the overall performance during the quarter posting a return of 8.1 per cent. This was a remarkable return in comparison to the previous quarter’s 2.5 per cent return,” said Actserv in the survey.

“The overall return has greatly outperformed inflation during the quarter— giving a good value to schemes’ members in comparison to the last quarter where many schemes underperformed the inflation benchmark.”

The Actserv survey polled 364 schemes, with Sh602.2 billion in funds under management.

In the second quarter, fixed income investments gave the schemes a return of 5.2 per cent, up from 3.1 per cent in the first quarter, while offshore investment returns fell to 4.2 per cent from 8.7 per cent in quarter one.

On an annualised basis, the overall returns stood at 13.8 per cent, with offshore investments the best performing at 20.5 per cent in the year to June.

The 12-month return from fixed income stood at 14.9 per cent, and equities at 11.2 per cent.

The average scheme allocation to fixed income fell to 72.8 per cent in quarter two from 75 per cent in quarter one, while that of equities rose from 19.2 per cent to 22.3 per cent.

Average offshore investment also rose, from 2.35 per cent to 4.3 per cent.

 Credit: Business Daily

Published on 7 August 2017 | 9:21 am at Source