Tax Laws Act ushers in new era for pensions sector
Real Estate
By
Macharia Kamau
| Jan 09, 2025
The retirement benefits sector has been tipped to benefit from the new Tax Laws (Amendment) Act, with more Kenyans expected to save for their sunset years.
While some of the clauses of the new Act are expected to hit Kenyans with higher taxes, the Retirement Benefits Authority (RBA) notes that there are those that are expected to offer some reprieve.
The Authority says the provision of retirement benefits in the Act will promote retirement savings, ease healthcare burdens in retirement and empower retirees.
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“These amendments represent a monumental shift in how retirement benefits are managed and taxed… while fostering a sustainable retirement benefits ecosystem,” said RBA Chief Executive Charles Machira in a statement yesterday, adding that reforms in the retirement benefits industry align with the economic realities of the day.
="https://www.standardmedia.co.ke/business/business/article/2001509260/new-year-pain-for-consumers-as-fresh-round-of-taxes-kick-in">One of the area
This adjustment, Mr Machira said, addresses inflationary pressures and the rising cost of living, enabling Kenyans to save more effectively for their retirement.
Among the key benefits that accrue from the increased limit are individuals being able to save more without significantly impacting their taxable income, reduction in PAYE liabilities with higher deductions resulting in lower taxable income and inflation mitigation.
The new law also introduces a tax-deductible limit of up to Sh15,000 per month for contributions to post-retirement medical funds, which Machira noted would address the critical need for healthcare in retirement. This, he noted, would encourage Kenyans to save for healthcare in retirement.
="https://www.standardmedia.co.ke/business/business/article/2001496985/imf-world-bank-at-odds-on-tax-kenya-policies">It also exempts pension< benefits from registered pension schemes from income tax for individuals who reached retirement age, withdraw funds due to ill health before retirement and even those withdrawing after at least 20 years of membership.
“This amendment shifts the narrative of retirement savings from untouchable reserves to flexible, safeguarded resources addressing diverse needs,” said Mr Machira.
The Act also requires individual retirement funds, pension funds and provident funds to register exclusively with RBA, which the Authority noted would eliminate the dual-registration requirement with the Kenya Revenue Authority (KRA).