discarded to use the country’s pension
savings to bail out failing state-owned
enterprises (SOEs) such as Eskom,
South African Airways and the South
African Broadcasting Corporation. This
presents a daunting prospect not only
for pensioners, but also for would be
contributors to pension schemes given
how badly managed South African SOEs
are thought to be.
Around $400 million is estimated to be
in the country’s pension reserves. This
money would undoubtedly jumpstart
South Africa’s ailing economy if properly
utilized. However, there is widespread
skepticism that the ANC would be able to
manage such an immense undertaking in
a manner that is seen to be above board.
Here in Kenya, it is estimated that close
to 90% of the country’s workforce are not
part of any pension scheme nor do they
have a retirement plan in place. Startling,
isn’t it? Current long-term population
trends imply that old-age poverty in
Kenya will escalate if this state of affairs
persists.
Recent research by Infotrak Research &
Consulting Limited reveals that there is
limited awareness of registered individual
pension schemes in Kenya among young
workers aged between 18 and 35 years.
Just 2 in 10 are aware of any registered
individual pension scheme.
Unsurprisingly, many young Kenyan
workers are not prepared for retirement
nor are they ready to even contemplate
preparing for it. Tellingly, most young
Kenyans rely on their personal saving
and investments as their main source of
income when they retire rather than their
pension remittances.
Though there is an acceptance that it will
be necessary to save more for retirement
as they grow older, currently most young
Kenyans are saving for future purchases of
items they cannot readily afford. They also
save for emergencies.
Basically, the perception young Kenyans
have of pensions paints a rather complex
picture. Generally young Kenyans believe
that pension remittances are to be made
by the elderly or by those who have already
retired. With respect to the retirement
age, many young Kenyans are not clear on
when they want to retire or have not yet
decided whether they want to retire.
There is also a palpable sense of fear
created by the expected change life after
employment will bring. There exists a
distinct lack of trust in pension providers
largely due to the current high corruption
levels in the country that have severely
eroded public confidence in financial
institutions. Consequently, many young
Kenyans would rather save and invest in
other ways.
Notably, there is a sense in which the
Government is not doing enough to
increase the uptake of pension amongst
young people. This is underpinned by the
limited knowledge of available pension
schemes and providers. The public also
has a very limited understanding of the
policy framework on pension schemes,
contribution
and
taxation. Other
obstacles to taking up pensions are limited
or unstable incomes as well as negative
feedback from existing pensioners.
The issue of running sustainable pension
systems is a difficult problem for policy
makers the world over. Politically, the
easier option may be to ignore the future
but this is likely to come at a massive
social and economic price at some point.
What then must be done to halt our
march towards a bleak dystopian future
in which our senior citizens are rendered
completely vulnerable and helpless by the
unfolding pension crisis particularly here
in Kenya?
First, government needs to create an
environment in which the number of
people accumulating resources to support
their later life and the amount they
accumulate, principally through workplace
pension schemes is increased.
Second, the onus is on the government to
reduce the perceived complexity associated
with pension systems and establish a
foundation for longer and more flexible
working in later life for retirees. This will
go a long way in reducing old-age poverty.
Third, a lot more consumer education
is required for young Kenyans to make
informed choices about pension products
early enough as they start their work-life.
Other measures that can be taken include:
reviewing the national retirement age;
making saving easy for everyone by using
technology like MPesa like CPF Group’s
Mpension (*289#); and supporting
financial literacy efforts starting in schools
targeting vulnerable groups like youth,
women, minorities, the marginalized and
PLWDs.
Walter Nyabundi is the Manager for
Loyalty Research & Special Projects
at Infotrak Research & Consulting
Limited. You can commune
with him via email at: Walter.
[email protected].