By Luke Anami

A weak legal pension framework is a danger to the ageing Kenyan population, a leading provider of retirement savings and employee benefit solutions has said.

Alexander Forbes Financial Services now want pension contributions by corporates made compulsory to ensure as many people as possible are covered.

“Whilst those of us who are working are able to take care of ourselves, in retirement, it is very difficult to take care of oneself because you don’t have a steady job,” explained James Olubayi, Group Chief Executive Officer, Alexander Forbes.

Sundeep Raichura (right), Alexander Forbes Managing Director and Richard Kemoli, chairman Board of Trustees at Alexander Forbes  during the press briefing.

He made the remarks at a press conference during their 5th Annual General Meeting held yesterday at a Nairobi hotel. “One of the things we urge the Government to do is to actually make pension compulsory for all employers with five or more employees.”

A December 2011 report by Retirement Benefits Authority shows National Social Security Fund, the largest compulsory scheme in the country has membership of 1.3 million out of the total population of 40 million Kenyans. Private sector’s voluntary occupational members account for a paltry 400,000 and Civil servants scheme is made up of 400,000 members, while the individual contributory open schemes have a membership of 60,000.

Pension data

This implies that only 2, 185,000 Kenyans have some form of pension cover, leaving out more than 37.9 million.

“Currently the Government gives tax incentives, but we believe that those tax incentives are not adequate,” said Olubayi.

The amount of contribution one is allowed to make tax free is Sh20,000 every month. “We would urge that amount be increased, despite the fact that the Government has challenges with its tax base,” he explained, a review he expects could encourage savings for retirement.

Olubayi said the mortgage scheme incentive, which the Government introduced and allows members to use their pension as collateral for mortgage has not been successful.

 “The government should instead push the financial sector to offer preferential rates to accelerate savings,” said Olubayi.

Employers were also challenged to embrace the culture of making retirement provision for their employees to enable them have a smooth transition after retirement.  “We would like to change the mindset of Kenyans to embrace a saving culture for retirement,” Sundeep Raichura, Managing Director of Alexander Forbes said.

Chairman of the Fund, Richard Kemoli, said the Fund will devise various strategies that would benefit members to better their personal and retirement finances.