More than half of Kenyans exiting employment before retirement age have tapped into their pension savings for survival or to start businesses, exposing themselves to old age poverty.
The inaugural SanlamAllianz Retirement Benchmark Report Kenya 2026 released yesterday shows that 53 per cent of respondents who left a job or business accessed part of their retirement savings early, while 26 per cent took everything.
Only 32 per cent preserved or transferred their full savings for old age use, as workers turned to retirement funds to meet immediate financial needs such as school fees and medical bills or pursue new sources of income.
More than half of those who withdrew the money later regretted the decision, the report says.
The law gives workers under 50 access to half of their pension benefits when they change jobs. This law has eroded retirement savings, warns the Retirement Benefits Authority (RBA), leaving retirees with inadequate savings upon retirement.
“Retirement savings are most exposed when a job or business ends and long-term money suddenly becomes accessible,” the report notes.
Kenya’s employment market offers limited security for many workers, with the economy creating more informal than formal jobs. Kenya National Bureau of Statistics data showed the economy closed last year with 18.1 million jobs in the informal sector, nearly 84 per cent of the total 21.6 million jobs in the country.
The SanlamAllianz benchmark study found that 39 per cent of working respondents had earnings that changed from month to month, making regular saving difficult and leaving households vulnerable to income shocks.
Many workers who lose formal employment tap into retirement savings to provide capital to launch a small enterprise, finance a farm or keep a household afloat while searching for another job. However, the decision shifts money intended to support them in old age into ventures whose returns are uncertain.
The report does not establish how many of the businesses supported by pension withdrawals survived or generated enough income to compensate for the loss of retirement savings. However, the findings expose the competing demands placed on savings when secure employment and predictable earnings are out of reach.
“What the research revealed is the complexity of turning that aspiration into reality. Preparing for retirement competes with many other financial priorities,” said Jacqueline Karasha, CEO of Sanlam Allianz Life Insurance Kenya.
“People are balancing the cost of raising families, paying school fees, managing healthcare expenses, building homes, running businesses and responding to unexpected financial pressures,” she added.
In the past, social security was not a bother to many Kenyans because there was a large extended family to fall back on in the rural areas. But as the social fabric changes and more people opt to retire in urban centres, the trend is increasingly becoming a headache to policymakers. This is prompted the government to start paying a monthly stipend of Sh2,000 for those above 70 years to cushion them against old-age poverty.
The SanlamAllianz report shows seven in 10 Kenyans said they were not on track for a comfortable retirement based on how much they were currently saving. This is despite widespread awareness of the importance of saving for their sunset years.
Household and family expenses were cited by 44 per cent of respondents as the biggest barrier to saving, followed by low or irregular income at 37 per cent and debt repayments at 24 per cent.
Additionally, 62 per cent said supporting dependants reduced their ability to save, while 39 per cent said they could cover basic household expenses for two months or less if their income stopped.
In the past year, 23 per cent of the respondents said they had dipped into savings or reduced retirement contributions when money was tight, rising to 29 per cent among earners aged 20 to 39.
Only 29 per cent of respondents knew the monthly income they would need in retirement, while one in five working-age contributors did not know how much they had accumulated.
