Determinants Influencing the Likelihood of Risk Management Strategies Adoption by Pension Schemes in Kenya

Abstract

Pension schemes play a fundamental role in an economy as the driving stimulant of savings, liquidity and robustness of capital markets. The current value of assets in the Kenya pension sector is about 17% of the Kenya’s Gross Domestic Product (GDP). The pensions sector provides employment directly, mobilizes savings for investment, reduces dependency and reduces poverty index by offering retirement income to the aging population. The Kenyan constitution promulgated in the year 2010 has made pensions provision and choice as part of the citizens’ fundamental rights. It is thus imperative that the pensions sector not only focuses on ways of maximizing returns but also focus on pensions risks management. This study sought to explore the determinants influencing the Likelihood of adopting risk management strategies by pension’s schemes in Kenya. The guiding objectives of this study were to find out the influence of Board of trustees composition, pension scheme size, regulatory framework, portfolio structure and administration structure of the pension schemes on the Likelihood of adoption of risk management strategies. The study design was descriptive survey. The target population was one thousand two hundred and sixteen (1,216) occupational pensions schemes registered with the Kenya Retirement Benefits Authority and stratified random sampling was used to select 192 representative sample of the population. Data was collected using observation, personal interviews and questionnaires and analyzed using Logistic Regression Model. The study findings showed that all the five variables had significant influence on enhancing the Likelihood of adoption of risk management, with the structure of pension administration found to be the major driver in influencing the Likelihood of adopting risk management.