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Millions of Kenyans ‘sleepwalking’ into a retirement crisis

Photo Caption: Sundeep Raichura – the Chief executive of Zamara Actuaries, Administrators & Consultants in a recent interview with the Managing Editor of Fortune Media Steve Umidha.

By Remie Otieno

More than 10 million Kenyans face a retirement crisis as they fall short of adequate savings once they leave work, experts have warned.

Although cracks have been forming in the foundation of the country’s retirement security for decades now, analysts believe the Coronavirus pandemic has only made it worse with lean solutions in sight.

Statistics show that less than 10 per cent of Kenyan population retire financially independent.

One of those reasons being cited for the sorry state is that, when saving for retirement, most people underestimate how much they will have to pay for medical expenses during their retirement years.

As a result it is now feared that about 16 million salaried Kenyans could be sleepwalking into a retirement catastrophe unknowingly.

“I can tell you Kenyans are sleepwalking into disaster without even knowing it,” expressed a concerned Sundeep Raichura – the Chief executive of Zamara Actuaries, Administrators & Consultants, adding that the problem is widespread with as many Kenyans not having insurance life covers to cater for their crucial needs such as disability.

Unless Kenya prepares for the challenge, a retirement calamity of immense proportions could happen sooner rather than later, according to Raichura who has questioned the foot-dragging by authorities to implement the National Social Security Fund Act of 2013 whose execution was expected to provide an obligatory superannuation pension plan for all salaried Kenyans.

It was also expected to address some of the challenges facing the sector today.

The Nssf no 45 Act of 2013 was assented to by President Uhuru Kenyatta on December, 24 2013 and came into force on January 10, the following year but its implementation has been overlooked.

“The NSSF Act of 2013 is in the national interest of our country…because what it does is it brings a compulsory pension for everybody who is earning a salary, it makes savings at a sensible rate. For whatever reasons stakeholders went to court and blocked its implementation, I feel it is sad a solution hasn’t been found to date,” noted Raichura.

The Act provided the contribution at the rate of 6 percent and was to be phased over a period of five years. It establishes that the National Social Security Fund provides Social Security for Workers and Self Employed Persons and their dependents.

Hosea Kili, County Pension Fund (CPF) and Local Authorities Pensions Trust (LAPTRUST) chief executive, agrees with his concerns and has called for the sector regulator – the Retirement Benefits Authority (RBA) to consider expanding social security coverage by making pension contributions mandatory for all Kenyans if the sector is to grow beyond its potential.

The establishment of a universal fund, he believes, would assist by allocating a percentage of the national budget to go towards universal pension and medical coverage.

“This can be achieved by introducing a pension levy on mandatory goods and services to realize mandatory State social security. It could also look at a levy on vital goods such as airtime, a small portion of which can be built over time,” advised Kili.

The two now want sector players to focus on the informal sector which makes up for the 80 percent untapped market with financial literacy a key determinant if the industry is to grow beyond its current market value of Sh1.4 trillion.

While there have been improvements in the sector amid the pandemic, many industry experts such as the Association of Pension Trustees and Administrators of Kenya (APTAK) are surprised by the growing reluctance from Kenyans to subscribe to annuity covers, considering positive economic projections and expectations in the sector.

Facts & figures

-Kenyan pensions sector had Sh1. 478 trillion in assets under management as of June 2021. Kenya’s retirement assets had been projected to hit Sh1.5 trillion by end of October 2021, up from Sh4.8trillion the industry held as at June last year, according to RBA.

– The authority plans to increase pension coverage from 20 percent to 30 percent by 2024.

– In 2020, around 17.4 million people were employed in Kenya, down from 18.1 million individuals in the previous year, mostly drawn from the informal sector. Roughly 14.5 million in the informal and 2.9 million in the formal sector.

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