Kenya Pension Funds closed 2025 on a strong footing, delivering solid double-digit returns for pension savers despite a visible slowdown in the final quarter of the year. According to the latest Zamara Consulting Actuaries Schemes Survey, the industry continued to benefit from one of the strongest equity market rallies in recent years, underscoring the growing importance of asset allocation choices in determining long-term retirement outcomes.
The survey, which covered 406 segregated retirement schemes managing KSh1.51 trillion in assets, shows that while quarterly momentum cooled in the last three months of the year, full-year performance remained robust by historical standards. The median one-year return across all participating schemes stood at 25.3 percent, comfortably extending the double-digit gains recorded in 2024 and placing pension fund returns well ahead of inflation.
This performance came against a backdrop of relative macroeconomic stability, easing inflationary pressures, declining interest rates, and a sustained bull run at the Nairobi Securities Exchange, all of which combined to support asset values across pension portfolios.
Kenya Pension Funds Quarterly gains slow, but remain positive
Retirement schemes recorded a median return of 2.5 percent in the fourth quarter of 2025, a sharp moderation from the 7.1 percent achieved in the third quarter. The slowdown reflected softer performance across both equities and fixed income instruments, although returns remained firmly positive.
Equity portfolios, which had surged earlier in the year, posted a median quarterly return of 8.3 percent, down from an exceptional 19.4 percent in the previous quarter. Fixed income returns eased more markedly, with the median quarterly return falling to 1.6 percent from 5.2 percent, reflecting the impact of declining yields following a series of interest rate cuts by the Central Bank of Kenya.
The moderation in the final quarter highlights a broader recalibration after months of outsized gains, rather than a reversal in market fundamentals. Analysts note that markets entered the final stretch of 2025 from an elevated base, making some deceleration inevitable as valuations adjusted.
Equities dominate full-year performance
Despite the softer close to the year, equities emerged as the standout asset class in 2025, delivering extraordinary gains that drove overall scheme performance. Quoted equities posted a median one-year return of 64.3 percent, dwarfing returns from other asset classes and outperforming key market benchmarks.
The rally was anchored by strong performance in large-capitalization stocks, particularly in the banking and consumer sectors. Shares of companies such as Equity Group, KCB Group, EABL and Absa Bank were among the key drivers, benefiting from improved earnings visibility, lower interest rates, and renewed investor confidence in Kenya’s economic outlook.
The strength of the equity market helped cushion pension schemes from weaker fixed income returns and reinforced the role of equities as the primary engine of long-term growth for retirement savings, particularly during periods of economic recovery.
Fixed income remains steady but less dominant
Fixed income investments continued to provide stability to pension portfolios, although their contribution to overall returns was more muted compared to equities. The median one-year fixed income return stood at 20.2 percent, outperforming the average 364-day Treasury bill but lagging behind broader bond indices.
The Central Bank of Kenya’s decision to lower the policy rate to 9.0 percent in December 2025 marked the continuation of a monetary easing cycle aimed at stimulating private sector credit growth. As yields on government securities declined, fixed income portfolios benefited from price appreciation, even as reinvestment yields softened.
For conservative schemes with heavy allocations to bonds and money market instruments, fixed income remained a key stabilizer, but the year’s results once again demonstrated the opportunity cost of limited equity exposure during a strong bull market.
Aggressive schemes extend their lead
Schemes with higher allocations to equities and offshore assets once again outperformed their more conservative peers across all measured periods. Aggressive schemes recorded a median one-year return of 28.1 percent, compared to 26.3 percent for moderate schemes and 24.5 percent for conservative portfolios.
The performance gap was equally evident over longer horizons. Over three years, aggressive schemes delivered an annualized median return of 19.0 percent, while over five years they achieved 13.7 percent, consistently ahead of inflation and above the returns of lower-risk portfolios.
Although only twelve schemes qualified as aggressive in the 2025 survey, their growing presence reflects a gradual shift in risk appetite among trustees, driven by improving market conditions and a clearer appreciation of long-term investment horizons.
Offshore assets offer diversification, not dominance
Offshore investments delivered the lowest quarterly returns at 1.2 percent, reflecting subdued global market performance in the final quarter and the stabilization of the Kenya shilling against the US dollar. However, over the full year, offshore assets returned a respectable 15.1 percent, underscoring their role as a diversification tool rather than a primary return driver.
Currency stability played a key role in shaping offshore performance. The shilling closed the year at 129.01 against the US dollar, slightly stronger than in September, limiting translation gains but also reducing currency risk for pension funds with foreign exposure.
While offshore investments remain exposed to geopolitical risks and global market volatility, their contribution to portfolio resilience remains strategically important, particularly in periods of domestic market stress.
Returns comfortably beat inflation
Perhaps the most significant takeaway from the 2025 survey is the sustained ability of pension schemes to preserve and grow real value over time. Inflation averaged 4.5 percent over one year, 4.7 percent over three years, and 5.8 percent over five years as at December 2025, well below the corresponding median scheme returns.
Over a three-year horizon, schemes delivered an annualized median return of 18.0 percent, while five-year returns stood at 13.6 percent, providing a strong real return buffer for retirement savers. This marked a notable improvement from earlier years, particularly 2022 and 2023, when high inflation eroded real returns.
The data reinforces the importance of evaluating pension performance over longer periods, rather than focusing solely on short-term fluctuations.
Asset allocation trends continue to evolve
The survey also highlights a gradual but meaningful shift in asset allocation patterns across the industry. Conservative schemes still dominate by number, accounting for over 64 percent of participating schemes, but their share has declined compared to previous years. At the same time, moderate and aggressive schemes have increased both in number and assets under management.
This evolution suggests growing confidence among trustees in diversified portfolios and a recognition that long-term liabilities require growth-oriented strategies, particularly in an environment of controlled inflation and improving macroeconomic fundamentals.
What it means for retirement savers
For members of retirement schemes, the 2025 results offer reassurance that pension assets are not only keeping pace with the cost of living but significantly outperforming it. The strong equity-led gains have boosted account balances and strengthened the long-term sustainability of retirement outcomes.
However, the survey also serves as a reminder that performance varies widely depending on risk profile, asset allocation, and market cycles. Trustees are increasingly under pressure to balance growth and capital preservation, while members are paying closer attention to how their retirement savings are invested.
As Kenya’s pension industry continues to mature, the 2025 performance underscores a central lesson: disciplined diversification, long-term focus, and prudent exposure to growth assets remain the most reliable foundations for retirement security.
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