Leading Schemes Administrator Bets on Training to Increase Pension Uptake

Fred Waswa, Group CEO, Octagon Africa.

Octagon Africa offers training to trustees as well as the general public as the firm looks at ways of scaling up the absorption of pension schemes

In Kenya, pension assets under management have grown significantly over the years to about Kshs 1.2 trillion. Out of this, the private sector holds majority of the assets at Kshs 900 billion, while Kshs 300 billion is internally administered by the National Social Security Fund (NSSF).

Despite the steady rise, industry experts believe that the growth is yet to reach its full potential. Only a small percentage of Kenyans belong to a registered pension scheme meaning that there is a vast opportunity to increase this.

According to Mr. Fred Waswa, the Group Chief Executive Officer at Octagon Africa, training people about financial planning is a major way to increase pension uptake.There is also the need by the government, as far as regulations is concerned, to draft policies and set up structures to ensure that every company in Kenya has a pension scheme or belongs to a pension scheme.

When Mr. Waswa left formal employment in the year 2001, his aim was to offer consultancy in the retirement benefits industry. Since then, he has never looked back and one of the things he has done passionately is training trustees as well as the general public.

In 2007, he founded Octagon Africa. The firm’s objective is to ensure members get the right service as far as pension scheme administration is concerned.

“The Retirement Benefits industry is structured in a way that for an organization to have a registered pension scheme, it must have an administrator, a fund manager and a custodian,” he says. A fund manager’s role is to undertake  research on investment and advise the trustees, a custodian holds investment assets, while an administrator does the record keeping for members in terms of contributions and accounts.

“At Octagon Africa, we keep records for our members to make sure benefits are contributed correctly, prepare members’ statements, as well as manage compliance,” he adds.

Every scheme has a board of trustees responsible for managing the pension fund and providing governance structure. The law requires that 50 per cent of the trustees are nominated by the members, while the remaining 50 per cent is nominated by the employer.The administrator, on the other hand,acts as the trustee secretary to the board to guarantee compliance with the law.

Passionate about training

Mr. Waswa has been passionate about educating the market and was heavily involved in the formulation of regulations when the Authority was formed in 1999. For instance, he took part in the formulation of fees structures for interim administrators and liquidators of pension schemes.

From the year 2000, there was a huge demand for compliance and undertaking of operations within the stipulated regulations, and this is where he saw an opportunity. “In the same year, I quit my job as a Pension Manager at Standard Chartered Bank to provide consultancy to trustees and sponsors of schemes who were looking to comply with the new regulations.”

It is in line with this that Octagon Africa provides both member and trustee training. The latter is aimed at equipping trustees with governance and management skills. Mr. Waswa is a key trainer of the Trustee Development Program at the College of Insurance. It is a requirement by the RBA for every trustee to go through the program prior to certification.

In the same vein, Octagon Africa did a strategic plan in 2015 and one of the things they wanted to do was to set up a training centre focusing on development and research on the areas that people need to be upskilled.

That’s why in 2016, it established the Institute of Pension Management that has two major mandates – individual and corporate training. The curriculum is approved by the Technical Vocational Education and Training Curriculum Development, Assessment and Certification Council (TVET CDACC).

“At the Institute we run a professional program – diploma in pensions – for universities, colleges, as well as form four students who want to work in the industry,” offers Mr. Waswa. “There is a very huge employment opportunity in the pension industry because of the growth of the industry,” he adds.

Corporate training, on the other hand, was inspired by the fact that the industry is driven more by individual trustees as opposed to corporate trustees. By training individual trustees, the Institute seeks to help them understand their responsibilities, liabilities and indemnities as they execute their primary role.

FRED WASWA: We are here to serve you.

Mr. Waswa also notes that the level of financial literacy among members is incredibly low. In this regard, the Institute provides training programmes to employees who are contributing to a pension scheme. The desire is to raise the pension knowledge profile across the country.

One of the programmes offered is the First Pay Cheque Management programme that targets individuals aged between 25 and 35 years. It seeks to aid young people starting out their careers understand the importance of managing their finances from their first pay cheque.

The mid-career financial planning programme targets individuals aged between 35 and 45 years. Mr. Waswa says 60 per cent of people make financial mistakes in the first 10 years of their careers. The program therefore helps such people correct their mistakes in their debts and credits.

The Institute also offers training for those people who are in their last prime years of employment. This pre-retirement training prepares the employed people on how to exit the stage with dignity.

Why Octagon?

We are very innovative. We were the first company to provide accounting as a separate service for retirement benefit schemes,” says Mr. Waswa.

The company has also developed its own internal system for administration known as Octagon Pension Administration System (OPAS). It is an online platform and a first of its kind robust and versatile system that provides superior administrative capability and functionality. The system allows members to view and download pension statements and contributions history, participate in trustee elections, apply for payment of retirement benefits, among others. It also allows trustees to monitor scheme compliance, approve applications of members, among other capabilities. The system serves over 90,000 members in Kenya, Uganda and Zambia.

Furthermore, Octagon delivers passionate service to its clients in line with its motto; Service with a passion. Octagon Africa has subsidiary companies in Uganda and Zambia where it provides pension administration and training services. Alongside the Octagon Pension Services Limited, the company also runs Octagon Insurance Brokers Limited that offers life and general insurance brokerage and advisory services to clients.

Alternative investments  

Retirement benefit schemes are supposed to invest their assets in certain forms to conform with retirement benefits regulations. According to Mr. Waswa, one of the things the industry has been getting into is property investments.

“There is a huge room for pension schemes to get into property investment and trustees have been looking for available opportunities,” he says. “The Retirement Benefits Regulations allows for a maximum of 30 per cent of the scheme fund to be invested in property,” he adds.

In this regard, Octagon Africa established Firmus Realtors Limited in 2015, a property company that provides retirement benefits schemes with property advisory services.

“We were driven by the fact that investment managers who offer investments advisory sometimes get conflicted while advising trustees to invest in property,” observes Mr. Waswa. “We, therefore, came on board to fill that gap because trustees are looking at having independent minds that will advise on best investment with great returns,” he adds.

Private equity, Fred notes, is a fantastic form of investment in which pension schemes can invest in. The risk is nevertheless high but has particularly good returns as long as you do a good analysis of the firm you are investing in.

However, the challenge with alternative investments is lack of knowledge. The Institute of Pension Management has therefore partnered with the Nairobi Stock Exchange to run a programme on alternative investments to create awareness among the trustees.

The capping of interest rates and lack of regulations on property acquisition, management and disposal are other challenges facing the pension industry.

Mr. Waswa, however, says the industry is still young and the prospect of more growth in coming years is positive.