This archive report was first published on 10 January 2020.
As an auditor for six years, you're likely familiar with the concept of pension schemes. But what exactly is a pension scheme, and how does it differ from gratuity?
According to the Retirement Benefits Act of 1997, a pension scheme is a fund contributed to by both the employer and employee to ensure a comfortable retirement. Gratuity, on the other hand, is a payment made by the employer to appreciate an employee's length of service, often contractual or dependent on company policies.
Under the Act, the Retirement Benefits Authority (RBA) regulates and supervises retirement benefits schemes in Kenya. The RBA's regulations state that an employee who leaves before retirement age (50) can receive their full contributions and half of the employer's contributions. The remaining half is retained in the fund and continues to accrue interest until the employee reaches retirement age.
However, a proposed amendment earlier this year sought to change this, but was rejected by Parliament, leaving the status quo intact.
So, what happens if your employer doesn't comply with your pension claim? Don't worry, there's a process in place. Fill out the necessary forms, submit them to your employer, and they should respond with an official decision. If they don't comply, seek redress from the Pension Scheme Trustees or contact your pension administrator for guidance.
It's your right to access your pension funds, but consider retaining the money in the current scheme or transferring it to a personal pension plan to continue earning interest. You'll also save on taxes, which can be punitive before retirement age.
Ultimately, the decision to access your pension funds before retirement age depends on your current financial needs and the returns on your intended investments.
