About 13.9 million Kenyans have no form of a retirement savings scheme, and the majority of them are in the informal sector.
According to data from the Kenya National Bureau of Statistics (KNBS), there were about 17.4 million people in the formal and informal sectors as of the year 2020.
“The labour market is skewed towards informal employment at 83 per cent. This is a time bomb and indicating that most Kenyans will retire poor,” the report notes.
The report was presented during the ongoing Minet Annual Pension Conference being held at a Naivasha hotel.
Addressing participants, Retirement Benefits Authority (RBA) official Jackson Nguthu said that the current number of individuals actively contributing towards a retirement benefits programme was approximately 3.5 million, which is just 25 per cent of the labour force.
“Out of this number, approximately 800,000 contribute to both the National Social Security Fund (NSSF) and the private occupational and individual schemes, with 2.7 million contributing only to NSSF,” he observed.
The data presented showed low contribution rates, such as the Sh400 channelled to the NSSF, short contribution periods, and early withdrawals from schemes.
On September 14, 2020, the Retirement Benefits (Mortgage Loans) Amendment Regulations came into force following an amendment to Section 38(1A) of the Act.
Mr Nguthu revealed that through the amendment, it became possible for members to withdraw up to 40 per cent of their accrued benefits, which is up to a maximum of Sh7 million for the purpose of purchasing a residential house.
“We saw an increased appetite from members to take advantage of this opportunity to acquire homes. However, on November 23, 2022, the High Court of Kenya issued a judgment quashing the amendment as well as the regulations. The main reason for the nullification was that the amendment was not subjected to public participation,” he noted.
On December 20 2022, in compliance with the court ruling, the agency issued a notice to the retirement benefits sector to halt any further disbursements to members.
“Further, we advised Trustees that it would not be possible to honour obligations which were entered into pursuant to the nullified law, including professional undertakings, as this would contravene the court’s orders,” the participants were told.
Mr Nguthu said the current strategic plan was meant to enhance pension coverage by initiating outreach programmes, warning that it would be disastrous “to be a pensioner surrounded by retirees without pension.”
Mr Jackson Nguthu, who is the Manager, Supervision at Retirement Benefits Authority, told those present that a recent survey of pensioners indicated that 73 per cent of them did not have adequate benefits at retirement.
“There is an urgent need to address this situation so that Kenyans who are retiring can be able to sustain themselves,” he said.
He called upon the Trustees and service providers to continue sensitising the public on the importance of saving for retirement and the need to sacrifice and make additional voluntary contributions to get maximum benefits.
Making his contribution during the event, Daniel Mainga, the General Manager Pension, Minet Kenya, called on Kenyans to make additional voluntary contributions for post-retirement medical cover.
“This product has not received as much traction as we expected but we are happy to note that some of your schemes have already begun accumulating post-retirement medical funds. We require all members to have a post-retirement kitty and therefore it is upon each one of us to encourage members to save,” he said.
He encouraged employers to support the agenda by providing incentives such as supporting contributions or, alternatively, catering for the initial contribution to the fund.
Mr Mainga decried what he termed as a “poor saving culture” among Kenyans, and called on employers to come up with saving schemes.
“Those in employment should start saving after getting their first pay cheque,” said the Minet Kenya General Manager.
He also said there is a need to make the savings scheme mandatory to increase the number of Kenyans who are actively contributing to a retirement benefits scheme, and urged the government and other stakeholders to popularise the issue of savings.
According to statistics, the three top pension systems in the world are the Netherlands, Denmark and Israel. In addition to having State pension systems, these countries have mandatory occupational retirement schemes for the employed.
