NAIROBI, Kenya, Nov 12 – The Retirement Benefits Authority (RBA) is proposing to the Treasury that pension firms be allowed to lend money to their members.
RBA Chief Executive Officer Edward Odundo said on Friday that this would give people an incentive to keep their money longer with the pension schemes.
Mr Odundo said the scheme was part of the authority’s plans to introduce new products into the market that could spur retirement saving.
“We are trying to create a situation where people can enjoy the benefits of saving for retirement. What we are going for is a situation like in cooperative societies where people can borrow little amounts with attractive rates instead of them pulling out all their money at once,” Mr Odundo said.
The Ministry of Finance recently reversed the law that barred people leaving formal employment before the age of 50 from accessing their employers’ contributions to pension schemes.
The change in law was done to give retirees access to their funds after they argued that maintaining a freeze on the funds was putting pressure on their living standards.
The RBA is currently engaging all stakeholders to come up with a mechanism of how the lending facility will work adding he expects it to be implemented in the next financial year.
Only 15 percent of the 10 million workers in the country have enrolled in retirement benefit schemes, while 70 percent of them without the scheme are in the informal sector, and the RBA has been on a quest to boost pension uptake in the country.
Mr Odundo said under the new Constitution, the RBA would be rolling out a County strategy that aims to adequately address the needs of the informal sector.
“The main thing is to try to get these people organised at the county level and get them to buy into the whole idea of pension. We want to roll out a campaign that will raise the level of awareness,” he said.
The new strategy intends to sign up eight million new pensioners in the next five years.
He was speaking on the sidelines of the Retirements Benefits Open Day.
RBA Chairman Justus Manyara challenged pension firms to come up with innovative products that make retirement saving attractive.
“This will make the person taking up pension afford to absorb the risks of diversified investment portfolios which yield higher returns than other investments over longer periods of time,” Mr Manyara said.