NAIROBI, KENYA: Kenyan retirees are earning way below the required amount of pension money they should be earning because of a poor saving culture and high taxation of pension schemes by the state.
According to figures from one of the country’s fund managers, the Zamara Fanaka Retirement Fund (ZFRF), Kenyans retiring at age 55 and above today are living on about 22 percent of their pre-retirement salaries against the market recommended standard of 66 percent.
ZFRF Chairlady Lucy Kambuni proposed that it was time the government amended the pension law to accommodate more Kenyans, even those that are not in formal employment, in pension schemes.
“There is need for introducing tax incentives on funds held by pension firms as part of key reforms required to enhance the growth of the sector. This would help the trustees in diversifying the asset base of funds, which would in the long run improve the returns for retirees at a time when many Kenyans were grappling with the high cost of living upon retirement,” said Ms Kambuni.
She was speaking during ZFRF annual update of its investment plans to its members.
Zamara Executive Director James Olubayi said the law capping the tax allowable retirement contribution at Sh20,000 has remained unchanged for over two decades and there was need to review it to improve the returns for retirees.
“The rate at which many Kenyans are retiring and thereafter living in abject poverty is worrying, and the government ought to safeguard this population by entirely overhauling retirement policies to grow the industry instead of piecemeal reforms that are normally effected during the budget review,” said Olubayi.
According to data from the Retirement Benefits Authority (RBA), More than 12 Million working Kenyans are not enrolled in any formal pension plan, and about 10 million who are not employed may not be saving for their retirement.
Mr Olubayi added that it may be difficult for young Kenyans, the so called millennials to retire without problems since 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," he averred.
Again according to RBA, retirement funds in Kenya hold about Sh1 trillion in assets.