More than half of Kenyans who left a job or business before retirement age have already drawn on their pension savings, according to the first SanlamAllianz Kenya Retirement Benchmark, released in Nairobi this week.
Among respondents who exited employment holding retirement savings, 53 per cent withdrew at least part of the money and 26 per cent took everything. Only 32 per cent preserved or transferred the full amount for old age. More than half of those who withdrew later regretted the decision, the report says.
Everyday costs crowd out long-term saving
Seven in 10 Kenyans said they were not on track for a comfortable retirement based on how much they were currently saving, even though most understood why saving for later life matters.
Household and family expenses were cited by 44 per cent as the biggest barrier to saving, followed by low or irregular income at 37 per cent and debt repayments at 24 per cent. Sixty-two per cent said supporting dependants reduced what they could put aside, and 39 per cent could cover basic household costs for two months or less if their income stopped.
In the past year, 23 per cent dipped into savings or cut retirement contributions when money was tight, rising to 29 per cent among earners aged 20 to 39.
“Retirement savings are most exposed when a job or business ends and long-term money suddenly becomes accessible,” the report notes. Kenya’s law allows workers under 50 to access half of their occupational pension benefits when they change jobs — a provision the Retirement Benefits Authority has warned erodes balances before retirement.
Informal work and thin buffers
Kenya National Bureau of Statistics data cited in coverage of the study show the economy closed last year with 18.1 million informal jobs, nearly 84 per cent of total employment. Among working respondents, 39 per cent said their earnings changed from month to month.
A third of those who withdrew used the cash to start or support a business or farm. The report does not say how many of those ventures survived or replaced the lost retirement income.
“What the research revealed is the complexity of turning that aspiration into reality. Preparing for retirement competes with many other financial priorities,” said Jacqueline Karasha, chief executive of Sanlam Allianz Life Insurance Kenya. “People are balancing the cost of raising families, paying school fees, managing healthcare expenses, building homes, running businesses and responding to unexpected financial pressures.”
Only 29 per cent of respondents knew the monthly income they would need in retirement, and one in five working-age contributors did not know how much they had accumulated. SanlamAllianz said it will repeat the benchmark each year to track progress.
Sources: Daily Nation | Business Quest
Photo: Lewis Mutugi / Wikimedia Commons (CC BY-SA 4.0)
