NAIROBI, Kenya, Oct 23 – Retirement pension schemes have been urged to be proactive in capturing the emerging youth market that is yet to fully embrace the value of planning for life after employment.
Retirement Benefits Authority Chairman Justus Migweta said youth in employment have inculcated a culture of materialism that does not guarantee them a sound financial future should anything happen to their job.
This, he said, had locked out money that could be used in financing development projects in the country.
“Their disposable income is used in flashy lifestyles premised on the new attitude which is not beneficial to them and the country at large,” Mr Migweta said.
He added that a survey carried out by the authority revealed a large number of them had a low opinion making any savings towards life post employment.
“The results show that the youth have little to no link with making retirement savings which is a worrying statistic,” he said. He however attributed this to luck of trust in the schemes.
“Many of these schemes have cheated many Kenyans out of their hard earned money so any new comer has to think twice on how safe his or her money will be in that scheme,” he said.
Economic Secretary Dr Geoffery Mwau said there is also need to focus on the informal sector owing to the large number of people it accounts for.
Dr Mwau said the sector had expressed a lot of interest in ensuring they can take care of their entire financial requirement in unpredictable working environments.
Through a partnership with the Kenya National Federation of Jua Kali Association, RBA is creating a scheme to capture this market segment. The scheme will allow low-income earners to contribute as little as Sh20 daily with returns at retirement determined by market performance of the funds.
Dr Mwau was however critical the government needs to ensure jobs are created for people to have the money to put in savings.
The low saving culture has also been attributed to lack of access to financial services, complexity of financial products and lack of investor education.
The government has slowly been trying to amend the Retirement Act to attract more people.
In his budget speech, Finance Minister Uhuru Kenyatta said a review of the Act would see new pension investments be put in government securities and infrastructure bonds.
This would ensure good returns to the investors and discouraged investments in dubious pyramid schemes.
The gazettement of the mortgage regulations has empowered pensioners to assign 60 percent of their accrued benefits as security for a housing mortgage.
Many pension schemes have also increased eth retirement age to 60 years in line with the government’s civil service pension scheme.
Many analysts feel this will enable reap more of the schemes given they will have saved more as well as give the schemes time to recuperate financially by giving more time to pay out.