Kenya’s retirement schemes recorded robust double-digit returns in 2025, supported by strong equity market performance, even as gains moderated in the final quarter of the year.
Kenya’s retirement benefit schemes closed 2025 with solid investment returns, buoyed by a strong rally in quoted equities and steady performance across asset classes, according to the latest industry survey by Zamara Consulting Actuaries.
Data from the Zamara Consulting Actuaries Schemes Survey (Z-CASS) shows that pension schemes delivered a median one-year return of 25.3 percent in 2025, marking another year of strong growth for retirement savings despite a noticeable slowdown in performance during the final quarter of the year.
The survey covered 406 retirement schemes managing a combined KSh 1.51 trillion in assets, providing a broad snapshot of investment trends and outcomes across Kenya’s pension sector.
Slower but positive fourth quarter
While full-year returns remained robust, performance eased in the last three months of the year. Retirement schemes posted a median return of 2.5 percent in the fourth quarter of 2025, down sharply from 7.1 percent recorded in the third quarter.
The moderation reflected weaker returns across both equities and fixed income investments, after a particularly strong third quarter driven by gains at the Nairobi Securities Exchange (NSE) and favourable bond market conditions.
Equity returns slowed significantly, with schemes recording a median return of 8.3 percent in the fourth quarter, compared with 19.4 percent in September. Fixed income assets also saw softer performance, delivering a median return of 1.6 percent, down from 5.2 percent in the previous quarter.
Despite the slowdown, returns remained positive across major asset classes, underscoring the resilience of pension portfolios in a period marked by shifting interest rate expectations and more cautious market sentiment toward the end of the year.
Equities dominate full-year performance
The standout driver of 2025 performance was quoted equities, which delivered exceptional gains over the full year. According to the Z-CASS survey, quoted equities posted a median annual return of 64.3 percent, far outpacing all other asset classes.
This strong performance reflected the sustained bull run at the NSE, where improved corporate earnings, easing inflation, and renewed investor confidence supported higher share prices across key sectors, including banking, telecommunications, and industrials.
The strength in equities helped offset weaker contributions from other asset classes and ensured that overall scheme returns remained firmly in double-digit territory, even as markets cooled toward year-end.
The median one-year return of 25.3 percent was lower than the 29.3 percent recorded in 2024, but still represents one of the strongest annual outcomes for the sector in recent years.
Aggressive schemes outperform peers
Schemes with higher allocations to equities and offshore assets continued to outperform more conservative portfolios across all time horizons measured in the survey.
Aggressive schemes recorded a median return of 28.1 percent over one year, compared with lower returns for balanced and conservative schemes. Over the medium to long term, aggressive strategies also maintained a clear performance edge, delivering median annualized returns of 19.0 percent over three years and 13.7 percent over five years.
A total of 12 schemes qualified as aggressive during the period, highlighting a gradual shift by some trustees toward higher-risk allocations as confidence in equity markets improved and the NSE extended its upward trend.
This shift reflects a broader reassessment of risk appetite within the pension industry, as schemes seek higher long-term returns to meet member obligations in a challenging demographic and economic environment.
Offshore assets lag in the short term
Offshore investments delivered the weakest quarterly performance among major asset classes, posting a median return of 1.2 percent in the fourth quarter of 2025.
However, on a full-year basis, offshore assets still provided meaningful diversification benefits, with a median annual return of 15.1 percent. Performance was supported by relatively stable global markets and a steady Kenya shilling against the US dollar during much of the year.
Currency stability limited foreign exchange gains for offshore holdings, but also reduced volatility in returns when translated back into local currency. Zamara noted that offshore assets remain exposed to global geopolitical risks, including shifting monetary policy, regional conflicts, and economic uncertainty in major markets.
Despite these risks, offshore investments continue to play a strategic role in pension portfolios by spreading risk beyond the domestic market and providing access to a broader range of asset classes.
Fixed income provides stability
Fixed income investments, including government securities and corporate bonds, continued to provide stability to pension portfolios, albeit with more modest returns compared with equities.
The drop in quarterly fixed income returns to 1.6 percent reflected easing yields and reduced trading gains toward the end of the year, following earlier periods of elevated interest rates. Over the full year, fixed income remained a key anchor for conservative and balanced schemes, offering predictable income and capital preservation.
The performance of bonds was closely linked to inflation trends and monetary policy, with Kenya’s inflation rate remaining relatively subdued through 2025.
Returns beat inflation over the long term
Crucially for pension savers, retirement schemes continued to generate returns that comfortably exceeded inflation over longer investment horizons, preserving and growing the real value of members’ savings.
According to the survey, median annualized returns stood at 18.6 percent over three years and 13.6 percent over five years. Over the same periods, inflation averaged 4.7 percent and 5.8 percent respectively, well below the returns generated by pension assets.
On a one-year basis, inflation averaged 4.5 percent as at December 2025, meaning that even conservative schemes delivered positive real returns for members.
This sustained outperformance underscores the importance of long-term investing and diversified asset allocation in shielding retirement savings from the erosive effects of inflation.
Implications for the pension sector
The 2025 results highlight the growing influence of capital markets on the financial health of Kenya’s retirement system, particularly as pension assets continue to expand and play a larger role in domestic investment.
With assets under management now exceeding KSh 1.5 trillion among the surveyed schemes, pension funds remain among the largest institutional investors in the Kenyan economy, with significant exposure to government securities, listed equities, and increasingly, offshore markets.
The strong equity-driven returns may encourage trustees to maintain or modestly increase exposure to growth assets, although the sharp quarter-on-quarter slowdown serves as a reminder of the volatility inherent in equity markets.
As schemes balance the need for higher returns with risk management and regulatory requirements, the performance trends observed in 2025 are likely to shape asset allocation decisions and investment strategies in the year ahead.
