Businesses & Financial News

Kenya’s aging workforce a time ticking bomb

The Kenyan workforce is aging and older workers are making up a greater portion of the workforce in public offices.

With the large number of baby boomers – those born after World War Two now aging, it is estimated that these individuals will soon join the ‘seniors’ group, and their survival in post-retirement is not guaranteed.

Statistics show that less than 10 per cent of Kenyan population retire financially independently with one of the reasons being cited for the sorry state being that when saving for retirement, most people underestimate how much they will have to pay for medical expenses during their retirement years.

Indeed, the Association of Kenya Insurers (AKI) says that the majority of the respondents to the association’s Kenya Retirement Preparedness Survey 2019 confirmed that they were not ready for retirement – with only 29 per cent feeling they are well prepared for retirement.

Other reasons for low preparedness among Kenyans are low income, lack of saving discipline, lack of financial literacy and investment ideas or options.

A retirement benefits scheme is a savings avenue that allows contributing individuals to make regular contributions during their productive years into the scheme and thereafter get income from the scheme upon retirement

Owing to those concerns, the government is racing against time to secure the future of these individuals whose lives after retirement hinges on social security.

Those concerns were heightened on June 10, 2021 during the country’s budget read as it is feared that the situation could worsen in the years ahead owing to Kenya’s life expectancy rate which has been increasing consistently since 2015, an indicator that the number of retirees in the country is on the rise.

In his 2021/22 budget statement, Treasury Cabinet Secretary Ukur Yatani said that the government will prioritize the amendment of the Retirement Benefits Act and the Pensions Management Information System later in the year to arrest a potential looming workforce crisis in the public sector.

“To enhance good governance and improve accountability and transparency in the management of retirement benefits schemes, I propose to amend the Retirement Benefits Act to provide for the registration and regulation of corporate trustees that provide services to pension schemes,” said Yatani at the time.

Further the CS called for the harmonization and the establishment of one National Retirement Policy in order to protect the interests of beneficiaries and rights of pension contributors.

The policy which is currently under development seeks to achieve comprehensive pension coverage across the formal and informal sector and is expected to be ready by December 2021.

“Given the disparities in the design of the various existing pension schemes and the attendant laws, it has become necessary that these laws be harmonized, hence the need for establishment of one National Retirement Policy.

Also on the cards is the development of post-retirement medical regulations to allow members to make additional voluntary contributions to a medical fund.

“This will enable retirees’ access the funds at retirement or transfer a portion of it to a medical insurance provider. However, the existing regulations exclude postretirement medical funds established under irrevocable trust by employers and service providers outside a retirement benefits scheme popularly known as “StandAlone Post-Retirement Medical Funds”, noted Yatani in his speech.

Healthcare costs have ballooned in the last decade, eating up wages and greater percentages of household incomes – and Kenyans who were saving for retirement during that time are not inescapably prepared for that cost and their account balances show it.

In January, the government rolled out the Public Service Superannuation Scheme that covers civil servants, teachers and the disciplined forces aged below 45 years at the commencement of the Scheme with an option for those over 45 years to join.

As of April 2021, a total of 340,318 public servants had joined the Scheme.

The government is also on course to establish a National Informal Sector Pension scheme which is expected to factor in long-term savings with short-term needs targeting more than 15 million informal sector workers who have been excluded from the current pension’s arrangement.

A majority of Kenyans in the informal sector are not covered by any pension scheme making them vulnerable during old age.

According to the Kenya National Bureau of Statistics (KNBS) FinAccess Report 2019, the pensions industry has witnessed significant growth with the number of registered members growing by a 10-year CAGR of 15.7 per cent to 3.0 million members in 2019, from 0.7 million registered members in 2009.

 807 total views,  1 views today

Comments
Loading...
Social Media Auto Publish Powered By : XYZScripts.com