RBA eyes informal sector to meet pensioners demands

By Jackson OkothThe Retirement Benefits Authority (RBA) has stepped up campaigns to increase pensions coverage to address the challenges posed by the country’s increasing ranks of an aging citizenry."We are going to have more retirees moving onto the streets in the next 7-10 years. What are we going to do with these people, most of whom will not have any pension plan to take care of their needs?" poses Edward Odundo, RBA’s chief executive officer.From an economic point of view, there are more people going into retirement faster the country’s ability to take care of their needs in old age."In the past, people used to invest in their children and therefore saw no need to save for retirement. But things have changed. Pensioners still take care of university graduates," observes Odundo.There will be more retirees moving to the streets in the next 7-10 years, which is why the RBA is seeking to raise more funds. [PHOTO: file]It is for this ticking time bomb that RBA is eyeing the informal sector as well as the youth, to change their attitude towards saving for retirement and change the misconception that this exercise is only for those in formal employment or old people."We want the youth to consider a pension plan as one of the items in their financial planning," says Odundo.Available statistics indicate only 15-20 per cent of the country’s workforce has some form of a pension plan, but those mostly in the informal sector as well as the youth remaining uncovered.RBA estimates that if the present coverage increases to 50 per cent, this could double the country’s pension reserves, from the current Sh300 billion.Presently, there are 16 individual pension plans registered by RBA, including those targeted at the low-income segments of the workforce.Basic safety netDiscussions have been going on between RBA and stakeholders in the informal sector, including the Kenya National Association of Jua Kali artisans, on the possibility of setting up pension schemes for its membership."These will provide basic safety nets to those in the informal sector. Although they will be more flexible allowing for irregular contributions and no strict rules of preservation, our usual safeguards will still apply," says Odundo.Efforts to improve the country’s under-funded pension system comes at a time when the Government is also toying with the idea of pulling out its support staff from the under performing National Social Security Fund (NSSF).It has also increased the retirement age for civil servants from 55 to 60 years and introduced a contributory public service superannuation scheme, with government and its employees contributing on a defined contribution basis.Government employees who have already received retirement notices or had their pension claims already prepared but had not attained the age of 55 as at March 5 this year, will continue to serve if they so wish, says the scheme’s sensitisation manual."This change in the current policy on retirement of public servants will have the effect of increasing pension reserves," says Odundo.Since independence, the Government has operated a non-contributory pensions scheme, whose benefits are paid from the consolidated fund.Figures indicate that the government will have spent close to Sh26.1 billion on pensions or 4.5 per cent of the recurrent expenditure by end of June this year. It is projected that this figure could rise to Sh30 billion by 2009/10 and Sh100 billion by 2030 if the government continues to draw from the consolidated fund.

RBA eyes informal sector to meet pensioners demands

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RBA eyes informal sector to meet pensioners demands

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