GAZETTE NOTICE NO. 5796

IT IS notified for the general information of the public that the Retirement Benefits Authority has issued the guidelines set out in the Schedule that shall apply to trustees’ remuneration policy and scheme expenses. SCHEDULE GUIDELINES ON TRUSTEES’ REMUNERATION POLICY AND SCHEME EXPENSES PART I—PRELIMINARY Citation 1. These Guidelines may be cited as the Guidelines on Trustees’ Remuneration Policy and Scheme Expenses. 2010 2010 Interpretation 2. In these Guidelines, unless the context otherwise requires— “administrator” means a person appointed under a written instrument by the trustees of a scheme to manage the administrative affairs of the scheme; “auditor” means a person, firm, director or partner of a firm, as shall be appointed by trustees to hold office as such in accordance with such terms and conditions of service as may be specified in the instrument of appointment and who shall be a member of the Institute of Certified Public Accountants of Kenya; “custodian” means a company whose business includes taking responsibility for the safe custody of the funds, securities, financial instruments and documents of title of the assets of scheme funds; “independent trustee” means a trustee who has been nominated by the sponsor and who does not have a material or pecuniary relationship with the scheme; “manager” means a company registered by the Authority whose business includes investment and management of funds and other assets of the scheme; “member” means a member of a retirement benefits scheme and includes a person entitled to or receiving a benefit under the scheme; “non-permissible expenses” means the expenses that shall not form part of the scheme expenses; “policy” means the Trustee Remuneration Policy; “prudent” means good, sound and well-documented judgment in avoiding risks and uncertainties; “scheme” means a retirement benefits scheme registered under the Act; “scheme expenses” means those expenses incurred by trustees or their agents in the general administration and management of the scheme; “service level agreement” means an agreement entered into between a service provider and trustees or between different service providers that sets out the terms and conditions of appointment; “service provider” means an administrator, manager, custodian and any other provider contracted or appointed by the scheme; “sponsor” means a person who establishes a scheme and includes a founder of a scheme; “trustee” means a trustee of a scheme fund and includes a trust corporation; “trustee remuneration” means any payment made to a trustee for the duties carried out on behalf of the scheme; and “trustee expense” means any allowances, payments or reimbursements made to cover reasonable and necessary costs legitimately incurred by a trustee while attending a duly constituted meeting or affairs of the scheme. Objectives of the Guidelines 3. The objectives of these Guidelines are to— (a) set out the principles and procedures for the determination and approval of the remuneration of trustees; (b) specify the permissible and non-permissible expenses for scheme operations; and (c) guide trustees on how to determine the fees payable to ensure quality of service and value addition services. Outcomes of the Guidelines 4. The implementation of the Guidelines is intended to achieve the following outcomes— (a) the prudent management of scheme expenses; (b) enhanced transparency and accountability in the management of scheme expenses; (c) enhanced member confidence in trustees; and (d) minimisation of scheme risks. Application and Scope 5. (1) These Guidelines shall apply to all sponsors, trustees and service providers of retirement benefits schemes. (2) Trustees shall ensure that they prudently set and review the remuneration paid to them and fees stipulated in agreements signed with service providers. (3) Notwithstanding any other provisions of these Guidelines, the remuneration of trustees of statutory schemes shall be in accordance with the schedule of expenses or allowances under the relevant legislation. Trustees to Implement these Guidelines 6. The trustees of a scheme shall be responsible for the overall implementation of these Guidelines. Guidelines Provide Guidance on Minimum Standards 7. (1) These Guidelines shall provide guidance on the expectations of the Authority on the minimum standards required in setting trustee remuneration and prudent management of scheme expenses. (2) The trustees shall be responsible for ensuring compliance with these Guidelines. Remuneration to be Reported 8. (1) The remuneration of trustees shall be reported in the annual audited financial statements of the scheme. (2) The report shall be detailed, disclosing all remuneration, whether paid out of the scheme fund or by the sponsor. Limitations 9. (1) These Guidelines shall be subject to the provisions of the Act, the Regulations thereunder and any other applicable law. (2) Where there is a conflict between these Guidelines and the provisions of the Act, the Regulations or any other written law, the provisions of the Act, the Regulations or that other written law shall prevail. PART II—TRUSTEES’ OBLIGATIONS IN SETTING REMUNERATION AND FEES Approval of Annual Budget 10. Trustees shall ensure that there is an approved budget for the year clearly indicating the expenses and remuneration of the trustees. Setting Trustees and Service Providers Remuneration 11. (1) In setting their remuneration, trustees— (a) shall participate in the development of the trustee remuneration policy; (b) shall ensure that the remuneration is sufficient to attract and retain trustees to run the scheme effectively as approved by members in an annual general meeting; (c) may be paid all allowances and reimbursement of expenses as set out in the policy; (d) shall amend the policy as need arises and seek approval of the members of such amendments in the next general meeting; and (e) shall review the policy at least every three years or as provided in the law. (2) In setting fees payable to service providers, the trustees shall— (a) participate in a meeting to approve the basis of fees payable to service providers; (b) adhere to best governance practices in selecting service providers taking cognizance of the professional nature of engagement and fees charged; and (c) sign a service level agreement with the services providers and regularly review the fees at least once every three years. 5th May, 2023 THE KENYA GAZETTE (3) The fees payable to service providers shall be based on regular evaluation of the performance of the service providers by the trustees. (4) After setting the fees payable to service providers, the trustees shall ensure that the fees are paid as provided in the service level agreement and within the stipulated timelines. (5) Trustees shall prepare an annual report of the expenses incurred which shall clearly show the remuneration of trustees and fees paid to service providers, separately indicated. (6) The trustees shall ensure that the tax obligations in relation to any remuneration are fulfilled under the relevant tax laws. (7) Trustees shall seek guidance from the Authority on any matter that is not clear or on which a dispute arises in the process of the implementation of these Guidelines. PART III—GUIDING PRINCIPLES IN THE DEVELOPMENT OF THE TRUSTEE REMUNERATION POLICY Portability of Benefits 12. (1) Trustees of a scheme shall have an approved trustee remuneration policy in place. (2) Where trustees are not remunerated, a trustee remuneration policy shall not be required. (3) The trustee remuneration policy shall— (a) clearly state the meetings that are eligible for remuneration which, in any case, shall not exceed six full board of trustees’ meetings and six meetings per committee per year; (b) ensure all trustees are remunerated equally: Provided that the chairperson of the board of trustees may be paid a higher remuneration as may be approved by the members at the annual general meeting; (c) clearly stipulate the permissible expenses as highlighted in the First Schedule: Provided that the following shall not form part of the expenses of the scheme— (i) honoraria; (ii) responsibility allowance; (iii) bonuses; and (iv) meeting preparation allowance. (d) where foreign training and travel expenses are provided for, the same shall not be met out of scheme funds unless they are included in a budget for the scheme year that has received prior approval from the Authority and the Authority shall respond to such requests within fourteen days after their receipt; and (e) payment for reimbursable expenses shall be done upon the actual expense being incurred but no reimbursable expenses shall be paid before the meeting. (4) The trustee remuneration policy shall clearly stipulate that where a meeting is adjourned to another time in the same day, there shall be no separate payment of a sitting allowance for the continuation of the same meeting. (5) Trustees shall endeavour to hold their meetings in the principal office of the trustees: Provided that any meeting held away from the principal office of the trustees shall be adequately justified and included in the budget. (6) A trustee remuneration policy shall include— (a) the requirement that trustees set an annual budget for the expenditure to be incurred in the running of the affairs if the scheme including a budget for the remuneration of trustees before the beginning of the financial year of the scheme: Provided that the Authority may at any time require the scheme to submit its annual budget; (b) a rate for the payment of the remuneration which shall be a fixed amount not exceeding the amounts set out in the First Schedule; (c) the budgeted expenses incurred by trustees to attend a duly constituted meeting of the board of trustees or a committee of the board and which shall be as stipulated in the First Schedule; and (d) the frequency and cost of training, seminars, conference and retreats of trustees shall be prudently managed within the annual budget approved by trustees: Provided that during such training, seminars, retreats and workshops, the trustees shall not be paid a sitting allowance but shall be reimbursed for reasonable accommodation and travel expenses. (7) The guiding principles for setting the fees payable to service providers shall apply to a trust corporation. (8) Where a scheme hires experts or independent trustees to sit in the board of trustees, they shall be remunerated according to their expertise and performance and an agreement signed for their appointment: Provided that that scheme expenses shall be prudently managed as provided in the First Schedule. PART IV—PROCESS FOR SETTING AND APPROVING THE TRUSTEE REMUNERATION POLICY Statement when Trustees are not Remunerated 13. Where a scheme does not offer remuneration to trustees, a statement to that effect shall be carried in the annual audited financial statements of the scheme. Policy to Indicate Procedure of Remuneration of Trustees 14. (1) Where a scheme offers remuneration to trustees, it shall ensure that the remuneration policy clearly indicates the procedures to be followed. (2) A template for the trustee remuneration policy is set out in the Second Schedule. Trustees to Adopt Remuneration Policy at Duly Constituted Meeting 15. The trustees shall deliberate and develop a trustee remuneration policy which takes into account the principles set out in these Guidelines at a duly constituted meeting which has met the minimum quorum and is convened in accordance with the applicable law and the provisions of the trust deed and rules. Trustees to Forward Remuneration Policy to Sponsor for Concurrence 16. Once completed, trustees shall forward the trustees remuneration policy to the sponsor for concurrence. Automatic Concurrence of Remuneration Policy of Trustees 17. Upon the lapse of twenty-one (21) days after receipt of the trustee remuneration policy, and there being no communication or response from the sponsor regarding the policy, the trustees shall consider the same as concurrence of the sponsor and proceed as such. Objections by Sponsor to Remuneration Policy of Trustees 18. Where the sponsor raises any objections in writing within twenty-one days, and returns the trustee remuneration policy to the trustees for further deliberation, the trustees shall review the policy taking into consideration the sponsor’s comments. Authority to Give Directions in Dispute Between Trustees and Sponsor 19. Where there is a dispute between the sponsor and trustees regarding the trustee remuneration policy, the trustees shall forward the draft policy and communication from the sponsor to the Authority for direction. Trustees to Seek Approval from Members at Annual General Meeting 20. (1) Once in every three (3) years, trustees shall seek the approval of the trustee remuneration rates which shall be obtained under the related agenda of the annual general meeting. (2) Where the approval of the trustee remuneration rates is due, the trustees shall append the proposed rates to the annual general meeting notice and circulate to the members at least fourteen (14) days before the meeting. 2012 2012 (3) Members will be invited to submit written proposals in relation to the trustee remuneration rates proposed by the trustees which should reach the scheme office at least seven (7) days before the annual general meeting. (4) Notwithstanding the provisions of subparagraph (3), members may be allowed to make oral proposals at the annual general meeting on the trustees remuneration rates before subjecting the same to the members for approval. (5) Approval of the trustee remuneration rates set by the members shall be by a simple majority of members present. Rates Approved by Members to be Forwarded to Authority for Approval 21. The approved trustee remuneration rates shall be inserted in the trustee remuneration policy which shall be forwarded to the Authority for approval within fourteen (14) days of the annual general meeting date together with the relevant resolution from the annual general meeting signed by trustees and two members present who are not trustees. Prevailing rates to apply on failure to approve new rates 22. Where the members fail to approve the remuneration rates for trustees or there is an equal vote by the members or the meeting for whatever reason is not concluded with a clear decision, the trustees shall retain the prevailing trustee remuneration rates. PART V—BASIS FOR SETTING SERVICE PROVIDERS’ FEES Benefits from the Income Draw Down 23. (1) In determining the fees paid to service providers, trustees should consider the quality of service provided to the scheme. (2) The trustees shall ensure that— (a) the fees of a corporate trustees shall are based on— (i) a percentage of the value of the scheme fund or a shilling amount; or (ii) the number of members in the scheme with a maximum limit to be negotiated by the trustees; or (iii) the contributions received by the scheme per year or per month; or (iv) any other prudent basis as agreed with the sponsor; (b) the fees of an administrator are based on— (i) a percentage of the value of the scheme fund; or (ii) the contributions remitted by the scheme; or (iii) the number of members in the scheme with a maximum limit to be negotiated by the trustees; or (iv) any other prudent basis as agreed with the trustees; (c) the fees of a manager are based on— (i) a percentage of the value of the scheme fund; or (ii) the investment performance of the scheme; or (iii) any other prudent basis as agreed with the trustees; and (d) the fees of a custodian are based on— (i) a rate based on transaction fees for activities undertaken for the scheme; or (ii) a percentage of the value of the scheme fund; or (iii) charges in accordance to the particular service offered including safekeeping, out-of-pocket expenses, postage charges and transaction costs; or (iv) any other prudent basis as agreed with the service provider. (3) The trustees shall be prudent in negotiating fees payable to any other service provider out of the scheme funds. (4) The reimbursement of any other reasonable costs incurred by a service provider in the management of the scheme’s affairs shall be set out in the service level agreement. (5) Trustees must disclose where the costs reimbursed under subparagraph (4) give rise to a conflict of interest. PART VI—ENFORCEMENT AND COMPLIANCE Payment of Death Benefits 24. The Act, the Regulations made thereunder and these Guidelines provide adequate guidance to schemes on the Authority’s expectations on the prudent administration of trustee remuneration and a guide on the prescribed fees to be paid by the administrators, managers and custodians of schemes. Authority may Conduct Evaluations on Compliance 25. The Authority may from time to time conduct comprehensive evaluations of scheme’s compliance to these Guidelines to assess the implementation of the same. Authority may Direct Trustees to take Remedial Action 26. The Authority may require scheme trustees to undertake effective and timely remedial action to address any material deficiencies in its compliance with these Guidelines. PART VII—IMPLEMENTATION Schemes to Implement Remuneration Policy within Twelve (12) Months 27. Every scheme, other than a scheme managed by a trust corporation as sole trustee, shall ensure that it has a trustee remuneration policy or has reviewed the policy within twelve (12) months from the date of coming into effect of these Guidelines. FIRST SCHEDULE [Paragraph 12(3), (6) and (8)] SUMMARY OF PERMISSIBLE TRUSTEE REMUNERATION This table sets out a summary of permissible trustee remuneration and trustee expenses The First Schedule shall provide a guide in the remuneration of trustees and the rates agreed by trustees shall be included in the trustee remuneration policy. No. Expenditure Item Expense Details Maximum Expenses/Fees 1. Sitting allowance Taxable sitting allowance paid to a trustee when he/she attends a duly constituted meeting of trustees or board committee: Provided that the chairperson of the board of trustees may be paid an additional sitting allowance up to five thousand shillings for a meeting. Maximum sitting allowance payable to trustees per sitting based on scheme fund value at the beginning of the scheme year as set out below: (a) Fund value not exceeding five hundred million shillings – maximum, ten thousand shillings before tax (b) Fund value of more than five hundred million shillings but not exceeding one billion shillings – maximum fifteen thousand shillings before tax. (c) Fund value of more than one billion shillings but not exceeding ten billion shillings – 5th May, 2023 THE KENYA GAZETTE No. Expenditure Item Expense Details Maximum Expenses/Fees maximum twenty- five thousand shillings before tax. (d) Fund value of more than ten billion shillings – maximum forty thousand shillings before tax. 2. Daily subsistence allowance This allowance may be claimed and paid up to a set maximum per day when a trustee attends a duly constituted meeting of the board of trustees outside his/her normal place of residence. The allowance shall only be paid where the scheme has not made other accommodation arrangements for the trustee. Maximum Nairobi, Kisumu, and Mombasa – twenty thousand shillings before tax Other towns – fifteen thousand shillings before tax. 3. Foreign accommodati- on allowance The allowance shall be paid using the rate stipulated in this schedule in line with the rates published by the United Nations circular that gives the daily allowance for various categories and destinations. The allowance shall only be paid where the scheme has not made other accommodation arrangements for a trustee. Note exceeding the maximum published by the United Nations for different countries up to an overall maximum of five hundred United States dollars per day before tax. 4. Travel allowance Board of trustees shall be provided with transportation to the venue of a duly constituted meeting or scheduled activities of the scheme. In international travel or areas served by air transport, the means of transportation shall ordinarily be an economy class return air ticket. Where this option is not available or a trustee opts to travel by their own means, the trustee shall be compensated according to the applicable Automobile Association of Kenya (AA) mileage compensation rates. In the event that a trustee opts to use his or her own transport where scheme transport has been availed, the scheme shall not make any further transport payment. Actual transport costs or AA rates for a maximum vehicle capacity not exceeding one thousand eight hundred cubic centimetres. 5. Training expenses Actual costs incurred in attending training programmes, seminars Actual costs. No. Expenditure Item Expense Details Maximum Expenses/Fees and conferences related to the scheme business whose duration shall not exceed five days in each year. The number of days excludes the dates for the trustee development programme Kenya training. Provided that no sitting allowance shall be paid to a trustee for such trainings, seminars or conference. Stakeholder sensitization forums held by the Authority shall not be considered as trainings. Note: All scheme expenses must be budgeted and prudence exercised in the management of these expenses. In particular, scheme expenses must be incurred using the most cost-effective means of transportation. Such expenses will be supported by receipts for purchase of service. SECOND SCHEDULE [Paragraph 14 (2)] TRUSTEE REMUNERATION POLICY 1. Introduction Section 5 (ba) of the Retirement Benefits Act requires that the Retirement Benefits Authority (the “Authority”) approves trustee remuneration approved by members during the annual general meeting every three (3) years. The Authority has developed the Retirement Benefits (Trustee Remuneration Policy and Scheme Expenses) Guidelines to guide trustees in developing a remuneration policy. It is therefore, important for the board of trustees to develop this policy in conformance with the Guidelines. 2. Purpose of the Remuneration Policy (a) The main objective of the ___________________________ (insert your scheme name) is to provide retirement benefits to its members and beneficiaries. The primary duty of the board of trustees is to act in the best interests of the members. The trustees must ensure that the scheme remains financially sound through effective management and thereby, meet its obligation of paying out benefits as set out in the scheme rules. (b) The purpose of this trustees remuneration policy is to set out how, when and how much remuneration is to be paid to trustees and reimbursement of permissible expenses incurred in the conduct of the affairs of the scheme in accordance with the duties imposed by law. While doing so, the board of trustees reiterates its commitment to managing the scheme with integrity and prudence. The board of trustees, by subscribing to this policy, pledges to act in a professional manner with due regard to the trustees’ fiduciary duties and responsibilities, compliance with applicable laws and other policies that apply to the scheme. 3. Policy Objectives The trustees remuneration policy has been designed to align with the scheme’s objective and its strategic and business plan so as to: (a) promote certainty and awareness of the guiding principles of trustee remuneration; (b) match the scheme’s expenditure projections to the scheme’s sustainable funding and risk appetite; and (c) facilitate trustees’ participation in scheme activities, protect the trustees’ interests and meet the reasonable expectations of members. 2014 2014 4. Policy Statement (a) The provisions of this trustee remuneration policy shall apply in determining the amount of remuneration and benefits paid to trustees. This policy shall be read together with the applicable laws, the scheme trust deed and rules or statute (as the case may be) and other scheme governance policies. (b) The following principles on trustee remuneration shall apply: (i) Remuneration and benefits may be in the form of sitting allowances, transport facilitation or refund, and local or overseas travel and subsistence allowances. (ii) The remuneration rates that apply are as indicated in Table 1 in this Policy which may be reviewed or amended once in every three years or as may be provided by law. (iii) For prudent facilitation of remuneration and benefits, each trustee shall declare his or her home address, biodata and residential status to the trust secretary or administrator immediately after the trustee’s appointment. A trustee shall update the information if it substantially changes during the trustee’s tenure. (iv) Each trustee shall ensure that the tax obligations in relation to any remuneration received are fulfilled as required in the prevailing tax laws. (v) Trustee remuneration shall be equitable paid to all trustees without discrimination. However, an additional remuneration may be paid to the chairperson of the board of trustees. (vi) The board of trustees recognizes and appreciates that the scheme is a separate legal entity from the sponsor and that the sponsor’s rule son financial management or remuneration rates are not directly applicable to the scheme unless specifically adopted by the board of trustees through this policy. Where necessary, the board of trustees reserves the right to adopt industry accepted best practices. (vii) The trustees shall endeavour to hold meetings in the registered offices of the scheme. (viii) This policy shall be updated when a review of the relevant clauses in the scheme trust deed and rules or statute is made or every three years, whichever comes first. The scheme shall consider the prevailing industry benchmark rates before proposing or approving the review of the trustees remuneration package. Form 1 1. Remuneration of the Board of Trustees and its Committees 1.1. Financial Compensation (a) Sitting Allowance (i) The trustees shall be entitled to a sitting allowance as set out in table 1 in this Trustee Remuneration Policy. (ii) Trustees attending duly constituted meetings or scheduled activities of the scheme shall be paid a standard subsistence allowance as set out in table 1 in this Policy. (iii) Annual General Meetings or Special General Meetings will be considered as other regular meetings of the board of trustees and the trustees shall be paid a sitting allowance as set out in Table 1 in this Policy. (b) Subsistence Allowance (i) The scheme shall provide trustees who are ordinarily domiciled away from the registered offices of the scheme with accommodation whenever they have to attend meetings of the Board of trustees or its committees. (ii) Where a meeting or other function of the board of trustees is held outside the registered office of the scheme, trustees shall be provided with accommodation or a subsistence allowance as set out in Table 1 in this Policy. (c) Transport Allowance (i) Transport allowance is harmonized for all trustees. Transport shall be provided or refunded for travel to and from scheme activities as set out in Table 1 in this policy. (ii) Trustees shall ensure that they use the most cost- effective means of transportation while attending duly constituted meetings or scheduled activities of the scheme. (iii) Trustees shall be provided with transportation to the venue of duly constituted meetings or scheduled activities of the scheme. In areas served by air transport, the means of transportation shall ordinarily be an economy class return-air ticket. Where this option is not available or a trustee travels by his or her own means, the trustee shall be compensated according to the applicable Automobile Association of Kenya (AA) mileage compensation rates. If a trustee uses his or her own transport where scheme transport has been availed, the scheme shall not make any further transport payment. (d) Experts (i) Where a scheme hires experts to sit in the board of trustees, the experts shall be remunerated according to the signed contract. (ii) Trustees may, from time to time, identify the expertise missing in the board of trustees and hire such expertise using the normal procurement process to ensure transparency and prudent management of resources. (e) Taxation (i) The trustees shall ensure that the tax obligations in relation to any remuneration and scheme expenses are fulfilled under the applicable tax laws. (ii) Proper records of such tax payments shall be kept. (f) Mode of Payment (i) Payments shall be made using the most convenient and cost-effective method available to trustees. (ii) Proper records of such payments shall be kept with each trustee required to sign the scheme’s attendance register and the payments reflected in the scheme’s financial reports. 1.2. Non-Financial Compensation (a) Where necessary, the scheme shall take out a reasonable trustee indemnity cover for trustees from a reputable insurance company on such terms as may be approved by the board of trustees. Trustees shall only be covered whilst engaged in the pursuit of authorized scheme activities. (b) The insurance premiums paid for the trustee indemnity cover shall be a scheme administration expense legitimately incurred by the board of trustees. Table 1: Trustee Remuneration and Expenses No. Expense Amount (KSh.) 1. Chairperson’s sitting allowance 2. Trustee’s sitting allowance 3. Daily subsistence allowance (Major towns) 4. Daily subsistence allowance (Other towns) 5. Foreign accommodation allowance 6. Travel allowance Declaration The trustees of ………………………………… Scheme listed in this Policy, having held a meeting on the ………………………………, have passed a resolution that they will/will not be remunerated for the services rendered to the Scheme. 5th May, 2023 THE KENYA GAZETTE Signed by: Sign: Chairperson: Date: Signed by: [List all Trustees] Sign: Trustee: Date: Witnessed by: Sign: Trust Secretary/Administrator: Date: Dated the 18th April, 2023. CHARLES MACHIRA, PTG No. 2676/22-23 Ag. CEO, Retirement Benefits Authority.