This archive report was first published on 24 August 2020.
As of December 2019, Kenya's pension industry had witnessed significant growth, with the number of registered members increasing from 0.7 million in 2010 to 3 million, according to the Kenya National Bureau of Statistics (KNBS) FinAccess Report 2019.
However, despite this growth, a staggering 80% of the working population in Kenya remains unregistered, leaving the country's retirement preparedness level a major cause for concern.
Financial planning for retirement is crucial, and Cytonn Investments Management has released a report highlighting the importance of planning one's finances in preparation for retirement.
The report emphasizes the need for individuals to join pension schemes, which offer several benefits, including income replacement, compounded and tax-free interest, tax-exempt contributions, and homeownership.
Income replacement ensures that one's income stream does not stop even when they stop working, while compounded and tax-free interest allows savings to grow faster. Tax-exempt contributions also lessen the total PAYE deducted from earnings, and pension schemes ensure that members do not experience old-age poverty.
Furthermore, savings in a pension scheme can help individuals achieve their dream of owning a home, either through a mortgage or a direct residential house purchase.
The report also discusses the impact of COVID-19 on pension schemes and investments, including a decrease in the value of assets in retirement savings accounts and a lower capability to contribute to retirement savings plans.
Despite these challenges, pension scheme members are advised to stick to their retirement plans and keep contributing if they can, as withdrawing from a pension scheme can foil the retirement plan and reduce the income replacement ratio at retirement.
For more information on the various types of pension schemes and their performance in the past, readers can click here.
