This archive report was first published on 5 May 2020.
As the world grapples with the economic fallout of the coronavirus pandemic, a looming crisis is unfolding in the retirement sector in Kenya. According to Zamara Group, a leading retirement funds administrator, the number of retirees relying on their children or handouts is expected to rise from 12 per cent to 30 per cent by 2050.
Angela Okinda, Head of Umbrella Solutions, warned that the current economic scenario, where businesses have closed down and workers have been sent home, will lead to employees spending their savings on daily needs such as food and rent. "The longer the coronavirus social-economic impact continues, the higher the financial risk in retirement," she said in a webinar.
Okinda emphasized the need for pension schemes to sensitise their members on the importance of balancing immediate and long-term needs, with a focus on maintaining a disciplined practice of saving for retirement. "While disposable incomes are under severe pressure from rising costs of living, one must try to manage the expenses and keep saving for their retirement," she added.
Despite the challenges, experts believe that the equity markets will recover, creating a new pool of easy cash for old-age spending. Co-op Trust Investment Services chief executive Nicholas Ithondeka vouched for better times ahead for the equity markets, urging pension schemes to increase their stakes in various listed entities.
As of December 31, pension schemes had invested 24 per cent of their Sh1.3 trillion funds in equities and less than one per cent in offshore investments.
