This archive report was first published on 12 September 2019.
Kenya's retirement savings crisis is a pressing concern that threatens the country's economic stability. The Retirement Benefits Authority (RBA) reports that the country's income replacement ratio is a paltry 34%, compared to 84% in developed economies. This means that if a Kenyan earns Sh60,000 per month before retirement, they will receive a mere Sh20,000 upon retirement.
According to a 2018 report by the Census and Economic Information Center (CEIC), Kenya's Gross Savings Rate has been on a downward trend, reducing from 11.7% in 2007 to 6.1% in 2018. This decline in savings rate has significant implications for the country's economic growth and stability.
Mark Willie, Business Development and Consulting Manager at Enwealth Financial Services Limited, emphasizes the importance of early planning and knowing one's financial needs. He notes that individuals with a clear estimation of their retirement savings needs are more confident and willing to retire early. However, the reality is that many Kenyans are not equipped with the necessary financial planning skills, leaving them vulnerable to financial insufficiency and poverty.
The government's decision to increase the retirement age for civil servants to 60 in 2009 has only added to the problem. This move has denied younger citizens opportunities to grow and start careers, exacerbating the country's unemployment crisis. In contrast, in the private sector, individuals are expected to possess highly unique skills and experience to remain in service beyond the age of 50.
As Kenya continues to grapple with its retirement savings crisis, it is essential to prioritize financial planning and education. By doing so, citizens can take control of their financial stability and ensure a smooth transition into retirement. The pension system, as a low-risk investment opportunity, should be leveraged to promote savings and reduce poverty.
