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?Why Kenyan Millennials may not retire

By Erick Omondi | Published Wed, March 7th 2018 at 09:02, Updated March 7th 2018 at 09:08 GMT +3
Retirement fund (Photo Courtesy)

Millennials are generally defined as those born between 1980 and 1999. These individuals are thought to be an experiential generation, who despite the high cost of living, would frivolously spend their hard-earned monies, with little or no considerations to save for retirement.

As young people, we crave for instant gratification, the cost notwithstanding. We put on a flamboyant façade, eclipsing the grim reality of our financial struggles.

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We want to be “forever young” and dread the inexorable old age that keeps beckoning, especially one that would disrupt our profligate lifestyle.

Although every millennial’s dream is to live comfortably and financially secure when they retire, going by the current trends and statistics, this might be a mirage for majority.

The Retirement Benefits Authority (RBA) and industry players have made plausible efforts in drumming up awareness on pension products and services. This has, partly, led to a rise in coverage from 15 per cent to 20 per cent of employed citizens over the last 5 years, according to date from RBA. However, relative to growing numbers of the workforce population, this may not be a good enough coverage.

Even as the total pension assets inch towards the trillion mark, the 20 per cent pension coverage significantly lags other African Countries like Egypt and South Africa with a coverage estimated at above 80 per cent.

consumerism culture

More than 12 Million working Kenyans are not enrolled in any formal pension plan, and worse still, about 10 Million who are not employed may not be saving for their retirement. This point to a potential social risk that should be addressed.

Looking at millennials, on one hand, we have the lot living from hand to mouth – the unemployed. For them, there are far more important competing needs than saving for retirement. With current unemployment rates at a high of 39.1 per cent, there is almost no disposable income to set aside for retirement saving. I believe this can be addressed through existing government policies on job creation.

My focus today, however, is on the working millennials, a vast majority of whom are not enrolled in any pension scheme.

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Most are driven by a consumerism culture with little propensity to save. There is always an intricate balance between saving for retirement which is 40 years away or so, and paying oneself now. Most working millennials would find themselves sliding into the pool party of instant gratification, as recently well coined by a betting jackpot winner, tumia pesa ikuzoee (make acquaintance with money by spending it).

Espousing a saving culture, both short and long term, is crucial for securing financial freedom. Saving for the next Dubai holiday or to buy a house is as important as saving for one’s retirement.

We must try and kill the insatiable hunger to measure up to “peers”, making our social media pages appealing while stealing from our own future.

Assuming one works from age of 25, they are likely to have pay cheques for 35 years. Should they live for another 30 years post – retirement, assuming one retires at age 60, with no more paychecks; they would have to totally rely on retirement savings alongside other income generating investments, if any.

It therefore means that starting to save now, even if it’s a pittance is critical. The power of compounding and a long investment horizon will help us accumulate enough to take care of us when we retire. Otherwise we might just never retire.


Besides millennials’ averseness to saving, whenever they do, they break into the vault every time they change jobs, to purchase the next top – of – the – range phone or car or a fix a temporal financial challenge. Surveys have shown that most millennials expect to work for at least five employers in their lifetime.

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There might be some merit in introducing regulation barring access of at least 50 per cent of entire retirement savings until retirement age. An Income Replacement Ratio (IRR) of 60 per cent is considered the absolute minimum for one to maintain their pre-retirement lifestyle. Although millennials may have a longer horizon to retirement, the constant withdrawals and relatively low contribution rates would still result to a significantly low IRR.

Furthermore, a paternalistic approach, by making retirement savings mandatory for all employed citizens, would help the millions of employed non – retirement – saving millennials build a sizeable nest egg for their retirement.


We are digital natives. We prefer succinct and fast communication. We abhor processes and red tape. We, therefore, would prefer to be able to see at a glance our retirement savings by swiping on our iPhones and not have to ask for statements.

It should also be easy to predict how much it will be in 30 years on a mobile app. Brief pop – ups like, “did you know that saving 5,000 monthly for 30 years assuming an annual return of 10 per cent would earn you 11.3 Million at retirement?” would intrigue one to save more. An icing on the cake, would be adding a personal finance management tool, helping us to plan and analyse our income, expenses, savings and investments, all in one app. The Zamara Mobile App exemplifies this. The retirement benefits sector players thus ought to be nimble to adapt to the ever-changing needs of millennials.

Furthermore, since fundamental saving needs are generally common, there is need to develop financial products that are holistic rather than focusing on one saving need (retirement).

The word retirement is a distant and cacophonous sound to most millennials. It would, thus, be fitting to blend it in the melody of other words such as ‘investment’ and ‘financial planning’.

Circulation of short videos demonstrating success stories of such saving and investment plans and “how to” illustrations through social media platforms would reach the non – TV watching and non – newspaper reading selfie generation.

Mr Omondi is a Pensions Consultant at Zamara Actuaries, Administrators and Consultants.

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