This archive report was first published on 9 October 2019.
On October 9, 2019, Zamara Pension Scheme released its 2019 edition of Pension Performance Watch, highlighting the disparity in pension returns between large and small schemes.
According to the report, workers saving with large pension schemes will earn 26% more upon retirement than those saving with smaller ones, citing higher costs and narrower asset classes.
The study analyzed 100 pension schemes with net assets of Sh241 billion, covering over 146,000 members, and found that the average expenses smaller pensions incur are more than double those by larger ones.
Large schemes are defined as those with assets above Sh1 billion, while small schemes have assets below Sh250 million, and medium ones have assets between Sh250 million and Sh1 billion.
"These expenses have a significant impact on members over longer periods in the way of reducing returns. A member in a larger scheme would accumulate a balance at retirement which is 26% higher than the member in the small scheme," said Sundeep Raichura, Zamara Chief Executive.
Mr. Raichura attributed the disparity to costs such as trustee expenses, retirement benefits authority levy, investment management fees, custodial fees, audit fees, and administrative fees, which are key costs impacting on the efficiency of schemes.
Large schemes are also able to diversify into new asset classes beyond equities and fixed income to earn higher returns, while small schemes are inefficient to run as segregated schemes and should consider alternative structures such as joining an umbrella scheme.
