Every time I think about retirement, the first thing that emerges in my mind is poverty, suffering, loneliness, isolation, and desperation. This is because there is nothing to write home about many of the retirees I have come across. Truth be told, while not all retirees retire into penury, the majority of retirees end up living on handouts. Many retirees have a propensity to depend on their children or family members or relatives for their survival. In Kenya, the mandatory retirement age for public servants is 60 years depending on the profession. Admittedly, the most immediate effect of retirement is a dramatic reduction in living standards. Retirement, of course, means less and unpredictable cash flow thus lack of pension fund plan and poor investment increases the chances of dying in abject poverty.
And to add insult to the injury, their dependents may not be financially endowed to sustain their living standards. And therefore meeting their basic necessities like food, clothing, housing, and healthcare may become a herculean task. Even worse, they may end up perceived as bothersome and blameworthy. Besides being treated with disdain, objectification, and disrespect, they are subjected to donkey’s work where they earn itsy-bitsy payments.
More importantly, the twin problems of poverty and physical illness are the lot of many retirees. And if the push comes to shove, they end up selling their hard-earned properties or ancestral inherence to get their daily bread. And when the worst comes out of worst, others opt to commit suicide due to unceasing fear, trepidation, paranoia, uncertainty, shabby treatment, and depression. Many retirees do not live to see the fruits of their labor; they die almost immediately after retirement because they are not mentally prepared. Others are bombarded by increased financial pressures, and sickness emanating from poor health.
Financial Freedom and Pandemic
As the economic shock of the Covid-19 pandemic continues to rear its ugly head across the world, Kenya included; many jobs have been lost and the bloodletting is not over yet. The prolonged economic recession has rendered many Kenyans impecunious. Some businesses are finding it hard to survive in the present economic climate hence massive lay-offs and redundancies. More notably, unemployment and bankruptcy are common phenomena in an economic recession. Research after research has shown that 80 percent of Kenyans are not able to financially support themselves and their families after retirement. Lack of financial freedom has plunged many retirees into a dog’s life and a life of squalor and beggary. They are at the mercy of wish-wishers.
Many old people find it hard to live on a basic state pension-like Inua Jamii’s monthly largesse. Woe unto retirees who squandered all their savings recklessly and carelessly for the sake of instant gratification without anything to show. More often than not, they are looked down upon by the very people whom they sacrificed their earnings to bring up, clothe, house, and educate. The fact is, nobody can live on handouts for the rest of his/her life. Old age means poor health. And therefore, medical health insurance and geriatric hospitals are not an option.
It is important to state here without fear of contradiction that for over 60 percent of Kenyans, life is a desperate struggle for survival. Gross inequality and poverty characterize many households. Even before the emergence of the Covid-19 pandemic nineteen months ago, many employees used to do grunt work hence starvation wages. Regrettably, apart from employment, they have no other source of income, and their problems are compounded by the rising cost of living, low disposable and discretionary incomes.
In other words, many Kenyans hardly have enough for their daily needs and little wonder saving for old age is a distant dream or mirage. Millions of Kenyans are not on pensionable pay. More significant still, statistics show that pension coverage in Kenya is only 20 percent, that is, about 23 million people, of the working population.
Pension Scheme Coverage for safe retirement
Retirement Benefits Authority (RBA) in Kenya was established under the Retirement Benefits Act, Cap 197 to regulate and supervise retirement benefits schemes, promote the development of the retirement benefits sector; protect the interest of members and sponsors of retirement benefits schemes, and advise the Cabinet Secretary of the National Treasury on the national policy to be followed with regard to the retirement benefits sector. The enactment of the Retirement Benefits Act in 1997, which created the Retirement Benefits Authority (RBA) marked a new dawn in Kenyans’ pension plan.
In 2019, Kenya had pension scheme coverage of approximately 23 percent of the working population while in 2018 it was 20 percent. According to the October 2020 Financial Sector Stability Report, the assets of the pension industry increased in 2019 compared to 2018, with property investments growing to Ksh 238.65 billion by the end of 2019 up from sh 229.90 billion the previous year, and only sh 150 billion in 2015. The enactment of the Tax Act 2020 by President Uhuru Kenyatta where Section 38 of the Retirement Benefits Act(1997) gives leeway to pension contributors to use part of their savings to access mortgagee for residential housing is heartening. To that effect, pension contributors can now withdraw up to 40 percent of their savings or a maximum of sh 7 million to purchase a residential house.
Statistics from the Kenya National Bureau of Statistics(KNBS) FinAccess report 2019, pension industry has witnessed significant growth with the number of registered members growing by a 10-year CAGR of 15.7 percent to 3.0 million members in 2019, from 0.7 million registered members in 2009. Encouragingly, during the 2020/2021 fiscal year, sh 123 billion or 3.9 percent of the budget was allocated to pensions or similar payments. According to Cytonn Investments weekly report dated March 7, 2021, several benefits accrue to retirement benefits scheme members like income replacement, compounded and Tax-free interest, tax-exempt contributions, avoid old-age poverty, and homeownership.
Key Takeaway
A proactive and pragmatic approach to retirement and pension schemes can greatly mitigate financial problems during retirement age. For those in the informal sector, they can enter into Personal Retirement Savings Accounts or Individual Pension Plans to save for their retirement. Early planning for retirement is the best antidote to abject poverty as well as psychological and physical problems.
To be on the safe side, it is important to start saving as early as possible, during your youthful years or immediately after gainful employment. Planning for your retirement requires sound financial planning. Suze Orman succinctly encapsulates, “To enjoy a long, comfortable retirement, save money today.” Retirement should not mean a death sentence.
