Effect Of Fund Size On The Financial performance Of Pension Funds In Kenya

Abstract

The performance of pension schemes is imperative as they play a very significant role in the economy of any country. Over the past year pension reforms have been carried out that have brought in different pension schemes with different fund size. The present study thus did attempt to analyze the effect of fund size on the financial performance of pension fund in Kenya. Specifically the study determined the effect of density of contribution, cumulative assets, retirement age, costs and size of membership on the financial performance of pension fund. The study was conducted through the use of a descriptive survey design. The target population for the study comprised all the 1232 registered pension schemes in Kenya as per the Retirement Benefits Authority (RBA, 2014). A sample size of 93 registered pension schemes was selected for the study through purposive sampling. The study used secondary data, which was quantitative in nature and was collected from the annual financial statements of the pension schemes in the custody of the Fund Managers, Scheme Trustees, Scheme Administrators and RBA as filed returns. The data collected was for the period 2011-2015 The quantitative data collected was analyzed by the use of random effect model and correlation analysis. The data was presented though tables, frequencies, charts and graphs. The study found out that administration expenses, investment expenses, pension contribution and accumulated fund assets all have a significant effect on the financial performance of pension fund in Kenya. This was indicated by p-values of 0.04, 0.000, 0.000 and 0.019 respectively. Number of active members and Exit age was determined to have no significant effect on the financial performance of pension funds. This was indicated with p-values of 0.843 and 0.413 respectively. The study concludes that pension contribution, costs and accumulated fund assets significantly affect the financial performance of pension funds. The study thus recommends the need to have more family size pension funds, the need for pension schemes to embrace more cost effective measures and the need for development of new contribution models.