The pension industry plays a huge role in the Country’s financial sector and the economy at large. Bearing that pension schemes collect, pool and invest funds contributed by their respective members, it is apparent that good governance is the bedrock of a well-run pension scheme.
Need for governance considerations for pension schemes
A proper governance framework in pension fund management minimizes compliance costs and enhances efficiency while ensuring that the risks taken are acceptable and within the threshold stipulated in the investment policy. Noting the need to improve the investment performance of Retirement Benefit Schemes, the Retirement Benefits Authority (RBA) introduced the Retirement Benefits (Good Governance Practices Guidelines) 2018 (hereinafter the guidelines) purposed to enable sponsors, members, trustees and service providers to implement and promote proper standards of governance and sound practices.
One of the principles of the governance guidelines is that their application shall be in accordance with the general principles of corporate governance. Consequently, it sets out that pension schemes shall establish governance policies such as: Code of Conduct for Schemes, Trustee Remuneration Policy, Trustees Remuneration Policy, and Induction and Skills development policy. The guidelines also provide that pension schemes are required to conduct a Governance Audit to ensure conformity to the highest level of governance standards. The governance audit may only be conducted by a person who is qualified to do so by the relevant professional body. At least once each year, the board of trustees is required to undertake an evaluation of its performance and the performance of the chairperson, the trust secretary and the person in charge of the internal administrator. The guidelines further provide that the board of trustees should seek to enhance its knowledge and skills where relevant, through training. Continuous training and induction ensure that board members bring in the right knowledge and expertise into the boardroom. In summary, the governance considerations for a pension scheme operating within the Kenyan jurisdiction are:
- Governance Audit
- Board of Trustees Evaluation
- Board of Trustees Training and Induction
- Company Secretarial Services
Scribe Services is a leading governance practitioner in the country and also an expert in providing the above governance related services: