NAIROBI, Kenya, Aug 5 – An expert in the insurance industry has warned Kenya’s pension schemes were at great risk due to the dire economic constrains being experienced by contributors.
Citing the ever increasing cost of living, high inflation rates, increasing food insecurity, high taxation and a slowing economic growth that has seen a number of people lose their jobs, UAP Insurance General Manager Stephen Maina warned that most individuals will be forced to withdraw their pension savings before retirement.
Speaking to Capital Business on Wednesday Mr Maina said such a move would have negative repercussions for individuals, companies and the public at large.
“These accumulated funds are what is usually used to invest in various developmental financial structures like Treasury Bills and Bonds that stir different economic activities within the economy,” Mr Maina noted.
He has proposed that the government cushion individuals from the current harsh economic environment by reducing on direct taxation and focusing more on indirect tax.
“Studies carried out time and again have shown that Kenyans are one of the most highly taxed population, (a situation) that the government needs to do something about to stop people from getting tempted from dipping into their retirement funds during these hard times,” he pointed out.
The expert further noted that under current legislation it’s not mandatory for companies to set up pension schemes for their employees an option that may become more popular in the current economic times.
As it stands now, individuals are allowed to access their contributions from pension schemes whenever they want but can only access the employers’ contribution once they attain the retirement age.
A past proposal to change the law to make it impossible for individuals to access the funds until they attain retirement age was met with huge resistance from the masses.
Mr Maina is calling for increased awareness campaigns to educate the public on the importance and the need to save for retirement.
“Global statistics indicate that life expectancy should rise from 60 to 70 years due to better medical facilities, increased awareness and better technology,” the expert observed.
“It’s important that when this happens people have money to live on as opposed to living from hand to mouth.”