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Over 70% of Kenyans unprepared for retirement — new research reveals

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Only a third of the country’s population is adequately prepared for retirement, a new survey commissioned by the Association of Kenya Insurers has shown.

The research, covering 10 counties, shows people in rural areas believe that they are slightly better prepared than those in urban areas at 32% and 27% levels of preparedness respectively. Looking at gender differences, females reported to be more prepared than their male counterparts at 31% and 27% respectively. The report also suggests that most Kenyans hope to retire at the age of 58.

The survey, conducted in April this year, featured 586 interviews from Nairobi, Machakos, Nyeri, Mombasa, Kisumu, Meru, Vihiga, Eldoret, Kericho and Garissa. The sample was split equally between urban and rural towns.

The low preparedness for retirement is blamed on several factors including high cost of living, not having enough income to save, lack of saving discipline, lack of financial advice and lack of investment ideas or options.

The goal of the study was to evaluate the level of retirement preparedness among Kenyans to better understand where there are gaps in the public’s knowledge as well as the products that are made available to them.

Specifically, the study sought to explore people’s awareness, knowledge, attitudes, and readiness for retirement. It also included exploring information needs and sources of information on retirement. From the study, it emerged that conversations with family and friends play the biggest role for individuals to start thinking about retirement. 

Speaking during the launch, AKI CEO Tom Gichuhi observed that no one expects to be poor when they retire. He however expressed concerns over the low levels of preparedness while noting that a retired person needs up to 60% of their last salary per month to maintain their existing standard of living through retirement.

“The Employees Retirement Benefits Fund can be an important source of retirement income, but it is often not be enough to finance the total retirement needs.

Sadly, most contributors spend much of their savings within three years of withdrawing their pension funds after retirement. One way of avoiding this is by using annuities to provide a guaranteed stream of income for as long one lives,” he said.

According to the survey, the National Social Security Fund (NSSF) received the highest level of awareness as a retirement savings plan amongst all study participants, urban and rural alike. Total awareness of NSSF was at 93%.

The level of awareness of other savings plans – employer provided benefits, personal contribution to pension, family help, personal savings, personal or group investments, farm produce, help from children and annuity- was higher among the older population compared to the younger generation of 18 to 24 years. Except for NSSF, awareness levels of the other savings plans varied with age and there was higher awareness in urban compared to rural areas. 

The report also indicates that most Kenyans want to be involved in income-generating activities and that they do not favor the option of relying on their children to take care of them in retirement. At the age of 35 years and upwards, the level of preparedness for retirement steadily increased while for the younger population, the level of preparedness was relatively low.

Geographically, populations in Nyeri, Meru and Kericho had the highest levels of retirement preparedness while those working in formal employment were more prepared than those in informal employment.

The report shows that NSSF stands out as the retirement plan many will rely on in retirement with more than half of the respondents referring to it as their source of income when they retire.

While there is a tendency of retirees venturing into business with retirement money, the study shows that many ventures started with retirement proceeds usually fail after a few years due to various reasons such as lack of management experience and knowledge of the business or industry.

An annuity can cure this by assuring a steady stream of income for the rest of the member’s life in exchange for an up-front lump sum (the premium).

“More effort needs to be in place to raise the awareness levels of other retirement savings plans including annuities that had only 19% total awareness,” the survey concludes.  

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