I have been fronted by our scheme members to vie for a trusteeship. What are some of the emerging issues I should keep in mind?
In 2019, the Retirement Benefits Authority (RBA) issued a circular titled Good Governance Guidelines, in collaboration with the Treasury.
This regulation sought to address emerging challenges in trusteeship and governance within pension schemes in Kenya, focusing on modernising these roles to ensure they meet current and future needs.
The guidelines identified three main areas that as a trustee, you should be aware of.
1. Trustee knowledge and understanding
The RBA intends to revisit the Trustee Knowledge and Understanding (TKU) offered to simplify and clarify its expectations for trustees, making it easier to implement good governance practices.
A key question raised in the guidelines is whether trustees should be required to demonstrate a minimum level of TKU and engage in ongoing learning.
This would mark a significant shift in trusteeship in Kenya, where trustees may soon be legally obligated to show how they have acquired and maintained their knowledge. For professional trustees, the bar may be set even higher to reflect their expertise.
2. Scheme governance and effective decision-making
To improve governance, the RBA is encouraging more diversity on trustee boards in terms of backgrounds, skills, and expertise. The consultation also seeks input on whether all trustee boards should be required to appoint at least one professional trustee.
Diversity in Kenyan trustee boards will become a key focus, with the aim of enriching decision-making processes and improving scheme governance. There is also an emphasis on professional trustees, whose involvement is seen as an advantage, particularly in ensuring adherence to governance standards.
3. Consolidation of definedcontribution schemes to umbrella
The RBA is increasingly focused on the consolidation of defined contribution pension schemes, particularly those that fail to meet governance standards.
Trustees of such schemes are encouraged to consider whether their members would benefit more from consolidation into larger, better-governed schemes.
The goal of consolidation is to reduce the number of poorly governed schemes in Kenya and ensure that all savers are in well-managed, value-driven pension funds.
Trustees of smaller schemes will need to reflect on whether their current setup meets the expected standards or if they should pursue consolidation.
The driving forces behind changes
The regulator’s overarching objective is to ensure that all pension savers in Kenya are members of well-governed schemes that deliver good value for money.
The guidelines stem from the recognition that some pension schemes are not meeting these governance standards, leading to unequal experiences for savers in well-managed versus poorly run schemes.
Ultimately, the RBA envisions that all pension schemes operate at a high standard of governance, providing members with the best possible outcomes.
What trustees should do next
To prepare for the impact of these changes, Kenyan trustee boards should take proactive steps, such as:
Assessing and recording knowledge: Ensure trustees, both individually and as a board, have the necessary knowledge and skills, and keep clear records of training and development.
Enhancing diversity: Evaluate the diversity of trustee boards in terms of demographics, skills, and expertise, and consider the benefits of appointing a professional trustee.
Considering consolidation: Trustees of defined contribution schemes should explore whether consolidation might offer better value for members, especially if current governance standards are not being met.
As the RBA moves forward with these changes, trusteeship in Kenya will need to evolve. This shift represents an important opportunity to strengthen the governance of pension schemes and improve outcomes for all pension savers across the country.
The writer is Retirement Benefits Consultant at Zamara. [email protected]
