Retiring without a plan is like buying yourself a coffin

Philip Mulwa worked as a banker at Standard Chartered Bank before he was retrenched in 1991 on medical grounds to limp into the cold, hard world of the penniless.

And just like that, his monthly income dropped from Sh19,000 to the Sh3,300 he was earning in pension — to service a house loan, feed and educate four children. It didn’t help that his wife was jobless, too.

“I fell into depression when I realised my house was to be auctioned. Shifting to the village was suicidal. My life turned upside down even after I adjusted to the situation. I was shunned by everybody apart from my wife. We were helpless,” says Mulwa, now 69.

Relief only came when his former boss employed his wife who has since retired. Nonetheless, it took years for the family to recover, says Mulwa who spends his free time at Buruburu Sports Club with fellow retirees.

Retirement is a hard pill to swallow. It is the worst kept secret in town. Many in employment dread retirement because it always comes as a shocker, despite the clock ticking rhythmically towards D-Day each birthday. Many a retiree, unable to adjust to the new lifestyle, end up distressed, broke or die prematurely without a regular pay check. It is a death sentence.

Rose Kung’a, 60, retired from Nairobi City County in August 2015 after 37 years, but says she walked home penniless. Kung’a was not pensionable — and today, unlike her fellow staff that were on the pension scheme, she can’t rest and eat the fruits of four decades of working. She has to labour more to put food on the table and meet other family needs in a tough environment.

“I was the breadwinner after my husband lost his job. I worked to just feed and house my family. Now, I have no savings to push me on together with my 27-year-old handicapped daughter,” she says.

She fears relocating to their rural village and is not sure she can afford life in her Kaloleni estate and fears the family might end up in a slum. Hers is the painful and emotional journey facing many former workers who must downgrade their lifestyles and shift to poorer neighbourhoods to make ends meet.

Experts say it boils down to a failure to envisage old age outside employment. By the end of 2016, the Retirement Benefits Authority (RBA) says Kenyans had Sh1 trillion locked in retirement benefits, but this figure is deceptive because individual savings are appallingly low.

Kenya, with a workforce of 15.16 million people in formal and informal employment (Economic Survey report of 2016) only has 162,000 individuals saving for retirement through dozens of registered pension schemes.

Nine out of 10 companies in Kenya do not have retirement benefit schemes for their staff, which means such workers retire without money despite having worked for decades. Indeed, out of an estimated 93,000 employers, only slightly over 1,200 have pension schemes registered with RBA, whose data shows that less than 20 per cent of the Kenyan workforce is saving for old age through various registered pension schemes.

Alexander Forbes Kenya CEO and actuarial analyst Sundeep Raichura, says the Kenyan culture of sitting pretty in the false belief that old age will cater for itself is creating an army of old beggars.

“We have more of consumption rather than saving culture, so that even those who do have the ability to save tend not to. In fact, most Kenyans don’t save for the next few years of their lives, let alone retirement,” says Raichura.

A survey undertaken by Ipsos Synovate Kenya in 2013 to establish the level of awareness on saving for retirement found that about 80 per cent of people with a livelihood save for immediate needs and contingencies.

“Most Kenyans are busy investing through other vehicles to secure their immediate future. We do not picture ourselves as old people with white hair. We live for today. Some believe we won’t see tomorrow, that retirement is not a reality,” states RBA.

The RBA has since activated a pension awareness campaign dubbed Kuregarega to compel Kenyans to confront themselves and come to the realisation they will need a backup in old age.

Former Kenya Commercial Bank (KCB) CEO Martin Oduor-Otieno warns that those who dillydally on investing for future end up depressed in old age. In his book, Beyond the Shadows of My Dream, he admits that at some point in his youth, he contemplated not saving.

“I used to think this way through my 20s, 30s and even 40s! But my experience now tells me that it’s never too early to plan for what you will do in your golden years,” he says.

Oduor-Otieno who retired from KCB in December 2012, notes that: “I have known people in the grieving stage who did not accept that time had come to move on, and who therefore kept coming back to their workplace each morning after retirement, just to be with their colleagues of 40 years.”

Duncan Ndirangu, 73, lived a vibrant life when he worked as a senior personnel officer at Posta. He owned a fleet of 10 matatus on the Kangemi route and his private car was a pricey Cortina.

His life came tumbling down when he was suddenly retrenched in 1994, just after his transport ‘empire’ had collapsed. With his monthly pension increasing at a meagre five per cent annually, it was impossible to fund his previous lifestyle.

“I had not invested and when I stepped out, I tried a kiosk business but failed. I needed money so badly that when children bought sweets from my shop at Buruburu, I would thank them. My house allowance went down to Sh1,000 and I had to sell my car at a throw-away price,” Ndirangu recalls, acknowledging, however, that his retirement benefits gave him a small safety net.

But David Samperu, 75, who retired in 1982 after two decades as a state guard in various institutions is not complaining. For him, transition into retirement was not a nightmare.

Samperu started with a Sh80 monthly salary, but with an annual increment of between Sh15 and Sh30. Of this, Sh25 went to the pension scheme. He was awarded a Sh70,000 lump sum of his benefits when he retired to his village in Kajiado.

“I increased my herd of cattle and today, my investment is still thriving, despite having taken care of my family into old age. When I want quick money, I simply sell some animals,” says Samperu.

According to actuarial analyst Sundeep Raichura, many workers go through a period of inertia and procrastination without an appreciation of how much to save for a comfortable retirement. He says they forget the significant impact that saving small for between 10 and 20 years can make.

“To retire comfortably, one needs to have savings or investments that can sustain 75 per cent of their pre-retirement income. Retirement should be the golden years of our lives. But for most people, this can be a very miserable time for lack of planning. More needs to be done to create awareness and provide solutions. The formal sector must have mandatory pension contributions legislated at a sensible level,” Raichura advises.

RBA CEO Dr Edward Odundo, says lack of interest to save for retirement is driven by a lack of financial education and importance of saving, low disposable incomes whereby saving is not a priority and other competing investment alternatives like chamas, Saccos and farming.

“Even those in the informal sector can be able to save for retirement in any of the 32 individual pension plans. Against the backdrop of a growing informal sector, we came up with the Mbao Pension Plan that was uniquely structured to take care of them. Anyone who can save a minimum of Sh20 a day or Sh100 a week can register,” says Odundo.