Concern as millions without savings in Kenya face poverty in old age

About 13.9 million Kenyans have no pension provision and most of them work in the informal sector.

According to the Kenya National Bureau of Statistics (KNBS), there were about 17.4 million people in the formal and informal sectors in 2020. “83 percent of the labor market is geared towards informal employment. This is a time bomb and suggests most Kenyans will retire poor,” the report said.

The report was presented during Minet’s ongoing annual pensions conference, which was held at a Naivasha hotel.

Speaking to participants, Retirement Benefit Authority (RBA) official Jackson Nguthu said the current number of people actively contributing to a retirement program is about 3.5 million, which is just 25 percent of the labor force. “Of that number, about 800,000 pay into both the National Social Security Fund (NSSF) and the private occupational and individual schemes, with 2.7 million paying into the NSSF only,” he noted.

Low contribution rates

The data presented showed low contribution rates, e.g. B. 400 KSh (3.21 USD) directed to the NSSF, short contribution periods and early exits from schemes.

On September 14, 2020, the Retirement (Mortgage Loan) Amendment Regulations came into effect following an amendment to Section 38(1A) of the Act.

Mr. Nguthu announced that the change made it possible for members to withdraw up to 40 percent of their accrued benefits, a maximum of KSh 7 million (US$56,000) to purchase an apartment building Opportunity to purchase a home. However, on November 23, 2022, the High Court of Kenya issued a ruling overturning both the amendment and the regulations. The main reason for the cancellation was that the change was not subject to public participation,” he noted.

On December 20, 2022, in accordance with the court ruling, the agency issued a notice to the pension sector to halt all further payments to members. “Furthermore, we have advised the Trustees that it would not be possible to honor any commitments made under the annulled Act, including commercial entities, as it would be contrary to the orders of the Court,” the court said communicated to participants.

improve pension protection

Mr Nguthu said the current strategic plan is designed to improve pension protection by introducing outreach programs and warned that being “a pensioner surrounded by pensioners without a pension would be disastrous”. , told those present that a recent survey of retirees found that 73 percent of them said they did not have adequate retirement benefits.

sensitize the public

He urged trustees and service providers to continue sacrificing the public to the importance of saving for retirement and the need for additional voluntary contributions to achieve maximum benefits.

Daniel Mainga, General Manager Pension, Minet Kenya, contributed during the event and encouraged Kenyans to make additional voluntary contributions towards post-retirement health insurance. “This product hasn’t garnered as much reception as we expected, but we’re pleased. Note that some of your systems have already started accumulating sick pay for the post-retirement period. We require all members to have a retirement fund, so it’s up to each of us to encourage members to save,” he said.

Offer incentives

He encouraged employers to support the agenda by offering incentives such as support contributions or alternatively providing the initial contribution to the fund.

Mr Mainga bemoaned what he described as a “poor savings culture” among Kenyans and called on employers to develop savings programs.

He also said there was a need to make the savings system mandatory in order to increase the number of Kenyans actively contributing to a pension system, and called on the government and other stakeholders to popularize the issue of savings.

According to statistics, the three leading pension systems in the world are the Netherlands, Denmark and Israel. In addition to state pension schemes, these countries have mandatory occupational pension schemes for employees.

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