A new report by Allianz, a global financial services provider, has found that Kenya’s retirees are among the poorest in the world, with an ineffective pension system leaving many senior citizens facing financial struggle well into their retirement years.
The report highlights that Kenya’s pension system fails to provide an adequate standard of living for its elderly population, resulting in more than 65-year-olds living in penury when compared to their peers in other countries.
The report surveyed 75 countries, including five African nations, and found Kenya’s meagre retirement benefits to be due to several factors: the inability of local pension schemes to mobilize adequate funds, the absence of a legal mechanism to delay retirement, and the lack of a proper ratio of current to future pensioners.
Local pension experts insist that well-run retirement benefit schemes can compensate retirees with an equivalent of 30% of their incomes, with the ideal range according to International Labour Organization standards being between 40 and 60%.
Critics of the current system have been pushing for an increase in monthly contributions, which currently stand at Sh200, to Sh1,080. However, participation in private pension schemes remains low, with permanent employees mostly participating.
Due to poor monthly contributions from workers, the only pension scheme that most employees participate in is the National Social Security Fund (NSSF).
Furthermore, Kenya’s low pension coverage has resulted in the country being ranked as having the highest population of people aged 65 and above who are still active in the job market, with close to 70% of its elderly male population still working.
The government has introduced a new voluntary state-backed saving scheme, allowing workers to set aside long-term savings, with the government putting in one shilling for every two shillings saved, up to a maximum of Sh6,000 per annum.
The government has also introduced cash transfers to the elderly, aimed at reducing dependency on the working-age population and averting a social crisis.