Co-op Bank lead a pack of three other commercial lenders in new state pensions deal

The Co-operative Bank of Kenya is leading a pack of three banks that has won a new deal keep the more than Sh100billion contributed as pension by civil servants held by the Public Service Superannuation Scheme (PSSS).

The other two banks are NCBA and Stanbic Bank respectively.

Effectively, the three banks edged out Bank of Africa, Equity, I&M, KCB, National Bank of Kenya, Prime Bank, SBM, and Standard Chartered who were the immediate former registered custodians of pension banks as of 2020.

“For now, we have a clear roadmap and have already done contracts with a fund manager, three custodians, and a fund administrator. This has been done through a competitive process with the contracts being awarded through the scheme trustees. All we are doing on our part is to monitor that each party is playing its role.” PSSS Chief Executive Officer Jonah Aiyabei said.

All the eleven lenders were involved in a highly contested bidding process to hold the contributions, which began in January 2021.

Currently, there are more than 350,000 civil servants, including members of the National Police Service (NPS) and teachers who started contributing to their own pension savings scheme in 2021.

According to the new contractual deliverables, the three banks are expected to keep all the schemes’ assets and produce quarterly financial management reports on the fund.

They are also expected to undertake statistical analysis of the investments and returns on investments from pension funds in their custody and provide the data to the fund administrator.

Further, according to a work plan by the National Treasury, the custodian banks will carry out the services for three years’ renewable on expiry by mutual agreement for a further period of three years depending on performance.

The custodians will also carry out Three years since the start of the contributions, PSSS assets under management have touched Sh105 billion and have more than 422,000 members. Asset management firm GenAfrica runs the scheme while CPF is its administrator.

“We are now second after the NSSF (National Social Security Fund) with around Sh105 billion in assets value driven by both member and employer contributions. Combined, we are getting around Sh3.6billion in contributions every month.” Aiyabei added.

The PSSS is a defined contribution scheme under which civil servants save towards their retirement benefits, which the Exchequer tops up.

From January, civil servants were expected to contribute 7.5 percent of their gross salaries from five and two percent previously while the government matches the contribution at 15 percent of civil servants’ gross salaries.

The scheme covers civil servants including teachers employed by the Teachers Service Commission (TSC) and disciplined forces.

Previously, the government operated a non-contributory pension scheme financed fully by the exchequer. The model however proved unsustainable as the full burden of the pension bill was placed on taxpayers.

The creation of the PSSS was part of reforms in the public service pensions sector which gave rise to the 2012 Public Service Superannuation Scheme Act.

All public defined benefit schemes were converted to defined contributory schemes aligning the schemes to best industry practices.

Civil servants below the age of 45 along with new hires in the sector were obligated to make contributions to the fund while workers aged above 45 were given the option to join the contributory scheme.