The national treasury has issued a notice to employers to withhold pension money from employees until they (the employees) reach retirement age.
This is a reversal of the regulation that allowed employees to access their pensions of up to half of the contributions even before retirement.
However, this year, the Retirement Benefits Regulations (RBA) scrapped of the provision that has affected mostly the employees in the private sector.
“Regulation 19 of the principal regulations is amended in paragraph (5) by deleting the words ‘and fifty percent of his employer’s contribution and the investment income that has accrued in respect of those contributions,’ part of the regulations read.
A shocker it will be, for the employees who would lose their jobs before the expected retirement age of 55 years. Those employees who do not have long-term pension views, especially the millennials will also fall into this bracket.
“The main cause of this low pension adequacy in Kenya was traced to frequent access to benefits before retirement with 95 percent of individuals out on the maximum available under the legislation in cash,” the chief executive officer, RBA, Nzomo Mutuku says in a press statement.
“Low pension adequacy points to a worsening of old age poverty with huge social implications in a country without strong social security systems and where urbanization has seen the disintegration of traditional systems that cared for the old,” Mr. Mutuku added.
Mr. Mutuku likened the situation to “going on a long-distance journey and emptying the fuel tank at every stop.”
The existing exemptions for early retirement still remain. The exemptions include early retirement, emigration, and medical grounds.
Members can also use the accumulated benefits to secure a mortgage to purchase a house as stipulated in the Retirements Benefits mortgage regulations.
The recent amendments by the cabinet secretary will thus help secure a brighter retirement for members of the retirement benefits schemes in Kenya.