The civil servant’s pension scheme, Public Service Superannuation Fund (PSSF), is changing its investment policy from the current 79.3 percent concentration in fixed income securities to more diverse asset classes including listed shares, private equity and off-shore investments.

The fund had Sh270.1 billion out of its Sh340.3 billion total assets invested in government bonds, Treasury bills, Eurobonds, asset-backed securities and bank fixed deposits in the year to June 2026.

It now says it is ready to take more risks in pursuit of higher returns for its members whose annual contribution hit Sh60.8 billion in the review period.

“The new direction seeks to balance between generating inflation-beating returns while preserving members’ capital over the long term,” said PSSF Chief Executive Officer Dr Jonah Aiyabei.

Retirement Benefits Authority (RBA) rules allow pensions to invest up to 90 percent of their assets in government debt while allocations to other categories like equities have caps.

The five-year-old PSSF held all its funds in Treasury bills and bonds three years ago but has been venturing into other assets in the last two years.

It recently participated in the Kenya Pipeline Company’s initial public offering and Talanta City Stadium’s infrastructure asset-backed bond.

Under the new policy, PSSF may allocate up to 20 percent of its assets to listed equities, giving it greater exposure to growth opportunities in the stock market. The framework also permits offshore investments of up to 15 percent, enabling the scheme to diversify geographically and reduce concentration risk within the domestic economy.

In the real estate segment, the Fund can invest as much as 20 percent in property assets, reflecting the long-term income and capital appreciation potential of the sector.

Up to 10 percent of the portfolio may be deployed into alternative investments such as private equity, infrastructure projects and private debt. The policy also permits exposure to infrastructure-linked instruments and sustainability-linked investments.

“With an average member age of 39 years and approximately 99.5 percent of our members more than a decade from retirement, the PSSF can tolerate short-term market volatility in pursuit of higher long-term gains,” said Dr Aiyabei.

The scheme has Sh18.3 billion invested in Linzi Bonds whose proceeds were used by the government to build the Talanta Stadium and affordable houses for military officers while offering annual returns of up to 15.04 percent. It also holds Sh239.8 billion in Treasury bills and bonds, Sh11.5 billion in Eurobonds and fixed deposits of Sh569.3 million.

This means the fund has invested 79.1 percent of its fund in fixed income securities while holding Sh2.3 billion in cash and fixed deposit underlining low risk appetite.

Currently it has invested Sh47.8 billion in listed equities, or 14 percent of its assets against RBA’s cap of 70 percent.

It invested Sh12.3 billion in the Kenya Pipeline Company’s Sh106.3 billion IPO, making it the fourth largest shareholder in the firm while helping boost the success of the offer which had failed to attract corporate investors.

Members of PSSF make a 7.5 percent contribution from their salary which the government tops up with a 15 percent contribution.

The fund has a membership of 529,635, the bulk of whom are teachers at 332,950, disciplined forces (120,084), civil servants (60,322) and 16,279 from county governments.

Prior to PSSF’s launch in 2021, public servants were covered by the defined contributions scheme managed by the National Treasury. Contribution to the fund was mandatory to public servants who were below the age of 45 when it came to be but voluntary for the older ones while every new employee since is automatically enrolled.

The management of PSSF disclosed they are likely to declare returns of between 13 and 15 percent to their 529,635 members this year which will be a drop from the 17.98 percent posted last year when interest rates were high.

PSSF reported a 15.3 percent increase in annual contributions to Sh60.8 billion in the review period from Sh52.7 billion the year before on the back of higher membership.

This means the fund is collecting averagely Sh5 billion monthly which solidifies its position as the second largest fund after the National Social Security Fund whose monthly collections average Sh8 billion.

Pension funds in the country had allocated 46.35 percent of their Sh3.16 trillion assets in government securities as at June this year with equities taking 14.3 percent, guarantee funds (19.3 percent) and immovable property (7.97 percent), marking the preferred investment classes.