A pension plan acts as security for a person after retirement in the future, and it can be every month or a lump sum of money. In Kenya, the pension plan is a way of retirement security where the retirement benefits authority must register the person eligible. The employer has to contribute to a pool of funds, which might be either in private or public pension plans. Moreover, pension benefits can be paid from registered pension funds, NSSF, and registered provident funds after the retirement age or withdrawal of the funding after 20 years of registration. The pension plan is implemented to provide the individual with pension funds after retirement, upon which they also get additional benefits. However, the pension plan policy also has some limitations that must be addressed to
make it more effective and reliable for Kenyan citizens after retirement.
The Kenyan pension scheme currently has 17%,, the lowest rate in East Africa. Considering the increasing number of the aging population, many people in Kenya contribute a small amount of their salary towards their retirement, which poses challenges when they receive their pension and funding. In old age, retired employees depend on a small pension that fails to cover all their needs. The little amount employees contribute towards their pension provides little coverage of their expenses after retirement, receiving little monthly or as a lump sum.
There is also the problem of a large number of Kenyans, almost 80% of the population, working in informal sectors, making it hard to enforce the pension plan. Around 3.5 million Kenyans have pension schemes despite the government’s implementing laws and policies that have NSSF to increase the number of people with pension plans. The limited number of people with pension plans also faces the severe challenge of delayed payment due to misappropriation of funds. Kenyan pension schemes have management personnel misappropriating funds, which has raised a lot of questions on the reliability of the pension plan, making people opt for private pension plans. The delayed pension increases the burden of the retired population
, considering that most fully depend on funds due to their old age. Moreover, there needs to be more trust in pension plans due to misappropriation and delays in funds from retirement benefits plans.
However, the challenges faced in the pension plan have led to various strategies to manage the challenges and increase the reliability of the plan. The major approaches are to the necessary contribution to NSSF, under the NSSF Act 2013, which addresses the longstanding low contribution towards retirement plans in Kenya. The act was to ensure an increase in pension funds by allowing the private pension sector to thrive. There is also an innovative solution to cover the informal industries with the most employees in Kenya. Moreover, to avoid misappropriation and delay of funds, the pension schemes in Kenya must be diversified to increase their efficiency and reliability in returns when retired Kenyans seek their pension.
In summary, Kenya has an elaborate pension scheme despite only 3.7 million of its population having retirement plans, as most of them work in the informal sector. People eligible for pension funds must be registered by the retirement benefits authority and
contribute to the funds they receive monthly or in a lump sum. The significant challenges facing the Kenyan pension scheme are misappropriation of funds, delayed payment, lack of funds, and limited coverage, which have raised a lot of concerns about its reliability. However, there are different approaches like mandatory NSSF, strengthening collaboration with private pension schemes, and diversifying pension plans, which will address the significant issues of the pension plan. Kenya has the lowest pension scheme in East Africa, with 17%, which is limited to covering their increasing number of retired populations. A pension scheme is a security after retirement that ensures a person receives some pension, and they must have been registered with the retirement benefits authority and contributed towards the plan to be eligible for the funds.