Saving money is a concept most people believe in yet so few manage to practice. There are many reasons why people may find it difficult to save, but here are a few of the most common excuses:
I don’t know where to save.
I don’t know how to save.
I can’t save.
I don’t have enough money for saving.
Prices have gone up and now I can’t save
Saving for your retirement;
It is never too early too late to start saving for retirement.
If you have just gotten a job, focus on saving as much as you can at the time, if you are nearing your retirement age, you should focus on increasing your contributions to your savings basket.
The earlier you start saving the better.
You should, first of all, know what you are saving your money for, the goal or purpose. Saving for your retirement is a long-term goal, that is if you are still young. Retirement goals could be like;
To build a new house, buying new land for building a new house, and generally, to have a comfortable life for yourself and family after retirement.
How much do you need to save for retirement?
Your set of retirement goals will help you determine how much you will need to save for your retirement. You will obviously save more money if you really need to have a comfortable life after retirement.
Age is also a factor when you want to determine this. When you start saving earlier, you will not have to pay more towards savings as compared to when you start saving late.
Retirement saving schemes /pension schemes in Kenya
There are four types of pension plans in Kenya:
This is a scheme set up by an employer who makes contributions on behalf of their employees for the provision of retirement benefits. Both the employer and the employee make contributions towards the scheme.
It is not mandatory for the
An Individual pension plan is usually set up by an individual to make contributions on his/her own behalf towards saving for retirement.
An umbrella fund is appropriate for all employers who lack the size to extract scale benefits from a stand-alone fund. Umbrella occupational schemes allow multiple, unrelated employers to participate in a single pension scheme.
Joining such a scheme is advantageous since the scheme has already been registered and is operational.
A public service pension is a workplace pension for public sector employees, for example, teachers, NHS workers, and civil servants. Many public sector pensions are defined benefit pensions, and some of them are unfounded.
The Statutory Scheme (National Social Security Funds)
The NSSF has pension scheme option that provides some benefits for your retirement.
Eligibility: Members are eligible for this benefit when they reach the age of 55 years, or when they ultimately retire from regular paid employment.
Retirement benefits scheme.
A defined contribution (DC) scheme is a scheme in which member’ and employer’ contributions are fixed either as a percentage of pensionable earnings or as a shilling amount, and a member’s retirement benefits has a value equal to those contributions, net of expenses including premiums paid for insurance of death or disability risks, accumulated in an individual account with investment return and any surpluses or deficits as determined by the trustees of the scheme.
A defined benefit (DB) Scheme is an arrangement where the benefits, which is ordinarily determined by the scheme rules, are defined in advance. Benefits are often related to the final salary and/or years of service of the employee. The main risk for beneficiaries is the solvency of the employer so as to be in a position to meet the promised benefits.
Provident fund means a scheme for the payment of lump sums and other similar benefits to employees when they leave employment or to the dependents of employees on the death of those employees.
In the case of a pension fund at the point of retiring a proportion of the retirement fund is commuted as a lump sum with the remainder paid out as periodical payments. The commuted amount will be equal to no more than one-quarter of the retirement benefits in a scheme where members do not make any contributions and not more than one-third of the retirement benefits in a scheme where members make contributions.
There are other classifications based on a number of factors such as the manner of investment and whether established by employers or by independent bodies for individual savers. Such schemes are:
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