Kenya’s Pension Systems are the second-best in Africa and 55th globally according to new rankings by Allianz Global Pension Report 2020.
In the African rankings, Kenya comes second to South Africa who also ranked 41 globally while Morocco and Nigeria who are Africa’s third and fourth had a global ranking of 60 and 64 respectively.
The Allianz Global Pension Report noted that Kenya’s young population is the reason for its high ranking. Kenya was given a total score of 4.3 out of 7 in the Allianz Pension Index(API).
“Not surprisingly, many emerging countries in Africa or Asia score rather well as the population is still young and public deficits and debts are rather low. On the other hand, many European countries such as Italy or Portugal are among the worst performers: old populations meet high debts, “the report by Allianz noted.
Sweden and Belgium had the highest scores of 2.9 globally and Denmark followed with a score of 3.0. 1.0 is the highest score a country could get.
In terms of starting conditions for the pension systems, Kenya was ranked fourth out of all the 70 analyzed countries.
However, Kenya is having a challenge of pension systems attributed to low coverage and benefit ratio of the public pension system which makes it rank lower at 61 in the sub-index.
“Furthermore, limited access to financial services hampers the build-up of sufficient private old-age savings to cushion the lack of the public pension pillar,” said Allianz’s Chief Economist Ludovic Subran.
Most countries are likely to have an increased age population in the near future and this could negatively affect the performance of the pension systems if elaborate measures are not put in place.
Kenya’s retirement population from example is projected to increase to 6.2 million in 2050 up from 1.3 million. The report notes that inclusivity in all age brackets would be key in improving the Pension Systems.
“Most important is the coverage of the pension system: all people in retirement age and at least 75% of the working-age population would be covered by the pension system.”
Allianz notes that Covid-19 should be a way forward in shaping various pensions among countries.
“In this context, the drastic measures taken to recover from the Covid-19 confinement shock could embolden policymakers to finally take more courageous steps when it comes to pension reform as well.