Zachary Ochuodho @zachuodho
Most retirees in Kenya live in poverty because they survive on 30 per cent of their pre-retirement income compared to a global recommendation of 75 per cent.
According to a study by Enwealth Financial Services and Strathmore University, old age poverty has social implications in a country where the traditional structures (mainly relying on children for upkeep) of caring for elderly people are disintegrating.
Speaking in Nairobi yesterday during a pensions industry stakeholder forum, Enwealth CEO Simon Wafubwa said average the income replacement ratio — which is the percentage of one’s pre-retirement income required to maintain them at the same standard of living in retirement — is worrying because many retirees fail to plan for their sunset years early enough.
Enwealth revealed that 85 per cent of Kenyans were worried about their inability to meet rising medical cost during retirement and at least 25 per cent of financial resources of retirees are used to cater for healthcare expenses.
“While the shortfalls of public pension plans have been extensively discussed, much more awareness needs to be created on the importance of preparing for lifestyle diseases that are largely driven by aging,” Wafubwa said. Shem Ouma, Chief Manager, Research and Strategy at Retirement Benefits Authority (RBA) said the old-age medicare costs is fast becoming a nightmare to the pension management industry.
Regulatory changes
Wafubwa said Enwealth supports the regulatory changes by Treasury in the 2019 /2020 budget which bars employees from accessing their employers’ contribution until they reach retirement age.
“Previously, workers could tap into their own contributions as well as 50 per cent of their employer’s contribution. Consequently, the pensions industry experienced massive outflows of benefits and abuse of retirement savings owing to the prevailing structure of the labour market where individuals frequently change employment,” he added. This, Wafubwa said, meant many people retire with little or no savings.
