Pension Crisis in Kenya: A Nation of Poor Retirees

When you think of pension, you picture a relaxed lifestyle with a considerable amount of monthly income in old age with no worries and stress.

This is, however, not the case here in Kenya because recent studies have revealed that the majority of Kenyans retire into poverty, with pensioners leading a much lower quality of life than they did during their active years.

A study conducted by financial services firm Zamara Group found that on average, the monthly pension received on retirement is equivalent to a third of retirees’ last earnings.

Stats from the Retirement Benefits Authority (RBA) indicate that in 2019, 3.2 million Kenyans are registered in pension schemes, an 18 percent growth from 2006, where only 600,00 Kenyans were registered.

Despite a large number of registered people in pension schemes, pensioners are still going into poverty within the first 3 years after retiring.

Read Also: Kenyans Retire With Only 22 Percent of their Pre-retirement Salaries

On top of that, stats indicate that the pension bill is projected to hit 110 billion shillings in FY 2020/2021, from 25 billion shillings in FY2008/09 and 86 billion shillings in FY 2018/19 due to a large number of new retirees. For this very reason, the government has been forced, in some circumstances, to retain some workers beyond the retirement age of 60.

While retaining old blood in the civil service has been attributed to a “skills shortage”, the real reason might be the unavailability of retirement benefit funds to cater for these ballooning retirees.

The current contribution scheme is also not helping in improving the state of the pension industry. There were suggested reforms in the contribution plans where civil servants were to contribute 2 percent of their salary to the retirement scheme in the first year, 5 percent in the second and 7.5 percent from the third year onwards, but this has been put on hold since 2013.

With the current procedural technicalities and mismanagement of the pension budget and the impact of inflation reducing the value of pension funds, it is not surprising that poverty lurks for many people upon retirement.

It is about time we built a retirement plan molded on sound investment and savings and good policies.

Read Also: Why Should Young People Invest in Pension Funds at an Early Age?