The National Social Security Fund (NSSF) recorded a 22 per cent jump in the value of its investment portfolio in 2013 as its total net assets grew from Ksh110 billion to Ksh135 billion.
The latest financial figures for the year ended June 2013 and certified by the Auditor-General show that the value of NSSF’s investment portfolio now stands at over Ksh135 billion compared to Ksh110 billion in 2012.
According to NSSF Chairman Adan Mohamed, the impressive growth is attributable to governance and financial reforms the Fund has been carrying out over the last five years including outsourcing investment of workers’ contributions.
“The reforms we are currently undertaking have set the NSSF on a firm growth trajectory. The ongoing implementation of the NSSF Act 2013 is the most significant of a raft of reforms that commenced in 2009, and which are now beginning to yield fruit,” said Mohamed.
The NSSF Act 2013 replaced the old NSSF Provident Fund and created two new funds, the NSSF Pension Fund targeting mostly employees in the formal sector and civil servants, and the NSSF Provident Fund to cater mainly for the self-employed and informal sector workers.
Mohamed announced that contributors to the Fund will now earn 12.5 per cent interest on savings, up from the current 7.5 per cent. “Our contributors will be the biggest beneficiaries of this stellar performance,” said Mohamed.
Besides implementing the NSSF Act 2013, which sets strict governance and financial management rules, the Fund has now appointed independent fund managers to manage its vast asset portfolio unlike in the past when this was purely a function of the management.
“Our investment returns have grown by between 17-20 per cent since the fund managers came on board unlike previously when investment was an internal function,” said NSSF Managing Trustee Richard Langat.
A re-alignment of its portfolio to comply with legal provisions capping investment in land and property at 25 per cent has seen NSSF shift focus to other asset classes such as Quoted, Unquoted Stocks, Government Securities and Commercial Paper with a combined value of over Ksh87 billion or 67 per cent of the Fund’s total portfolio as at June 2013 up from Ksh64 billion the previous year.
NSSF land and property holdings were valued at Ksh29 billion in June 2013, down from Ksh35 billion. Langat says the Fund has not bought any land or property over the last ten years unlike in the past. We have embraced prudence as a fundamental tenet of financial management. By outsourcing the investment function to fund managers, we have managed to re-align our portfolio hence the growth in total value,” said Langat.
Among the other reform measures the Fund has carried out include investing Ksh200 million in a new ICT system to optimize contribution collection and benefits payment by curbing leakages and delays in claim settlement. NSSF re-branded in 2012 and acquired ISO-Certification in 2013 as part of measures to enhance customer service and quality across the organization.
Implementation of increased pension savings rates as stipulated in the new Act is expected to boost workers’ contributions to NSSF to Ksh120 billion per annum by 2019 from the current Ksh8 billion per annum. The new rates, which are the subject of a pending court case, will be implemented over a five-year period.
Pension contributions in Kenya are among the lowest in the region, and this, according to Langat, has constrained the growth of social security sector in Kenya. “Fortunately, the new Act directly addresses this challenge by increasing the level of contributions,” said the Managing Trustee.
Currently, NSSF has over 1.7 million members and is targeting to increase this number to 3.8 million by 2019 through broadening coverage to the Public Service and informal sector.
AUTHOR:BEN GUMO