Study shows only one in four Kenyans save for retirement

A paltry 20 per cent of Kenyans save for retirement, a new study has revealed.

The research by pension fund experts at Zamara Group reveals that over 60 per cent of retirees deplete their retirement savings within the first five years after leaving formal employment.

Zamara Group chief executive Sundeep Raichura said most Kenyans are not saving enough to maintain their living standards in retirement.
“In Kenya, the pension schemes are paid in lump-sum and people who are used to getting regular pay tend to squander it all unless they are guided on the type of schemes to venture into.

Studies show that more than 60 per cent of retirees deplete their retirement savings within the first five years after leaving formal employment,” he said.

Speaking in Mombasa during Zamara’s 15th Annual Convention, Raichura said those saving only can replace about 34 per cent of their pre-retirement income far below the global benchmark of 75 per cent. The statistics, he said, highlight the urgent need for reform and innovation in the pension systems.

“Our research shows that the average Kenyan pensioner is only able to replace about 34 per cent of their pre-retirement income - far below the global benchmark of 75 per cent. This means that most Kenyans are not saving enough to maintain their standard of living in retirement,” said Raichura.

Zamara boss said for the 80 per cent of Kenyans working in the informal sector, retirement remains a time of financial uncertainty with many forced to work in old age or rely on family support.

He said although the Kenyan pension industry has grown to over Sh1.6 trillion in assets under management, representing 13 per cent of the country’s Gross Domestic Product more needs to be done to encourage young people to save.

Retirement Benefits Authority Marketing Director Paul Kiptanui said they are in talks with the Treasury Cabinet Secretary John Mbadi to introduce benefits for those contributing to the retirement kitty.

“We are working with other agencies to improve on policies and any person registered in the National Social Security Fund can apportion their savings towards housing and medical services,” said Kiptanui.

He stated that they are aware of institutions that have been struggling to remit employees’ pensions and have talked to them to put in a remedial plan to pay all the pending contributions.

Raichura explained that with Kenya’s population being young, with a median age of 20 years, there is a need to design pension systems that cater to the needs of a young, tech-savvy, and increasingly mobile workforce.

“We must ensure that the systems we build today are flexible enough to accommodate the changing nature of work, particularly in the gig economy, where traditional employment structures are being disrupted,” said Raichura.

He said the introduction of the Mbao Pension Plan was a great step forward, but more needs to be done to incentivise saving for retirement across all sectors of the economy.

Raichura emphasized that the sector should demand more transparency and accountability  from the government owing to the fact they hold 30 per cent of government securities.

The CEO said for Gen-Z, it takes a lot of time and they don’t look at rigid pensions schemes. We are looking at how to make our systems more relevant for their immediate future.