TUKO.co.ke sat down with the Chief Executive Officer of the Retirement Benefits Authority (RBA) for an interview and received shocking statistics about the saving habits of Kenyans.

Over 80% of Kenyans will end up in old age poverty for failing to save their finances by the time they will be retiring. This is because they believe that retirement is far away and most people bank their futures on financial help from their children or relatives.

 

“The social fabric that holds families together is fast breaking. As soon as a child gets independence, he/she is gone. They will have their own responsibilities. This is why most senior citizens are living in some level of poverty,” 
said Odundo.

Majority live from pay to pay and so cannot be consistent in their saving plans. Others opt to save using other means such as chamas or partnering in small businesses. Becoming a member of the an RBA registered pension  is compulsory for anyone in formal employment. Only the informal sector is allowed to make their choice due to the nature of their employment and cannot be forced to get on board.

By saving with RBA registered schemes, a pensioner is guaranteed lifetime retirement income. This money will have also generated interest because the regulator invests it on behalf of its members in sectors such as real estate, agribusiness and stock exchange shares among many others.

“It is advisable for someone to begin saving as soon as they enter into employment. We normally advise members to set aside 30% of their income. The earlier you begin, the better, because you will save more by the time you retire at the age of 60,” 
explained Odunda.


He made sure to assure members that their monies were safe in their chosen pension schemes despite previous cases of where corporations took advantage of their employees.

“As was the case in the Kenya Railways Pensioners issue, the pensioners were able to get back their money after RBA intervened. We managed to move some assets from the corporation and into the pension scheme,”
 explained Odunda.


This was after 9,600 employees filed a case against the Kenya Railways Pension management for fraud, and under the leadership of Odunda, the RBA turned the pension scheme into a SKh 17 billion industry.

“It is advisable for retirees to draw a monthly income from the schemes instead of a lump sum. While one would want to begin a business of some sort, research has it that most fold within the first two years of operation. So do not engage in business you have no knowledge of passion for,” 

advised Odundo.

 

Upon a member’s demise, his/her money can be accessed by their spouse but if they have no one in the entire world, the money is then handed over to the public trustees.

“This is basically the government. They will then decide what to do with the money but basically it is put to national use where it can serve the collective nation. For example, it can be given to the National Hospital Insurance Fund to help build up their financial pool,” added Odunda.

The Authority is planning to introduce automatic enrollment into the National Social Security Fund (NSSF) pension scheme when a Kenyan citizen attains the age of 18. This will be regardless of whether they are employed or not. RBA also plans to get involved in the government’s plans to introduce micro-chips into national identification cards where one’s social security number could be used to monitor a number of national social functions like the NHIF.

The Retirement Benefits Authority is a regulator of the pension industry to supervise and manage government and corporate schemes with which members opt to save with.

The Authority was set up by an Act of Parliament in 1997 but became operational in 2001. In the same period of time, RBA turned the Kenyan pension industry from a KSh 50 billion one to a KSh 1 trillion industry. This amount makes it contribute 28% to the gross domestic product of the country. The organization has registered 34 Individual Pension Schemes so far and in performing its regulation duties, ensures that these schemes are protected by law.