By Luke Anami
Domestic workers form the majority of savers in the Retirement Benefits Authority (RBA) Mbao Pension Scheme.
A study undertaken by United States International University lecturer, Amos Njuguna, further reveals if members of the informal sector are enlightened on pension matters and there are structures, they could save more for retirement – on critical success factors for a micro-pension scheme.
“Informal workers have specific characteristics that alienate them from formal pension plans, ranging from their constant change of jobs and temporary nature of employment contracts,” said Prof Njuguna, while presenting his findings yesterday.
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As at June, Mbao Pension Scheme membership had grown to 32,879 from slightly under 10,000 as at the end of last year. Six per cent of the 300 Mbao Pension members surveyed were househelps. Contributions to the scheme are Sh20 a day.
“Despite their low income and uncertainty over their pay, domestic workers are saving more in the Mbao Scheme than any other workers. This is encouraging as they have proven that saving is not for the big earners that only favour workers in the formal sector.” Njuguna said 42 per cent of informal workers who participated in the research earn less than Sh6,000 a month, with majority constituting house-helps.
He decried the low pension coverage despite the informal sector employing an about 80 per cent of the Kenyan workers according to the Economic Survey 2011.
“Despite this sector being a major employer, pension coverage remains a mirage since workers in this sector face income uncertainties and are the worst affected by turbulent Critical success factors for a sustainable micro-pension scheme in the country,” Njuguna explained. The reasons for low coverage include unemployment, low incomes, poor saving culture and above all pension arrangements that only favour workers in the formal sector.
The research findings are expected to enable RBA with policy formulation in a country where less than 15 per cent of the working population is covered. “This study seeks to enrich the policy makers with recommendations that will lead to sustainability of such a scheme. It also advocates a pension arrangement that is tailor made for the informal sector workers.”
RBA’s Research and Development manager, Nzomo Mutuku, received the findings of the study, ‘Critical Success Factors for a Micro-Pension Scheme’ – from USIU’s Deputy Vice-Chancellor-Academic Affairs Prof Matthew Buyu.
A micro-pension scheme refers to a pension arrangement that supports small, regular and sustainable savings by low income earners so as to provide them with a regular stream of pension annuities for the old age.