NAIROBI, Kenya, Nov 26 – Pension funds are finding it difficult to convince Millennials and Generation Z (ages 18 to 23) to save up for retirement.
According to Enwealth Financial Services Managing Director Simon Wabufwa, this is because they find saving for retirement as a goal to be realized in their next life.
Millennials’ lifestyle has become so unpredictable and Pension funds need to either adapt to the changes or shape out.
“The industry has been selling retirement savings using fear that you will die broke if you do not save up, but this tactic is not working for this generation,” he said.
“The millennial is one very unpredictable human being.”
According to the expert, Millenials tend to change jobs left right and centre, they also have a ‘live for today’ mantra and their nature of employment is contractual rather than permanent. They also tend to have a high appetite for risk.
According to a 2019 report by Wells Fargo, only 25 percent of millennial workers expect their primary source of retirement income to come from Social Security or a pension. Instead, 45 percent of millennials say their future retirement will be funded by personal savings.
Data by the Kenya National Bureau of Statistics Gross savings rate in Kenya as of December 2019 stands at 5.4 percent, with reasons for the poor saving culture pegged on lack of a regular income and low levels of income.
The latest statistics from the Retirment Benefit Authority indicate that only 21 percent of the working population are part of pension schemes.
And with the struggling economy coupled with the COVID-19 pandemic, things are expected to be worse.
For instance, with about one million Kenyans losing their jobs during the pandemic, pension savings worth Sh1.7 billion have been stopped.
According to Wabufwa, pension funds should be sold as an exciting product that can be reaped in the short term, rather than the long term.
“As a company, we have begun rethinking our retirement savings products to be as flexible as possible, some of the products we are looking at include savings at the point of sales through loyalty points,” Wabufwa added.
He says contribution remittance patterns should now change with millennials income patterns which have become very random.
“However, many Kenyans still don’t understand the importance of retirement planning and the benefits there off that include tax relief of the money you are paying tax, and you are able to access the savings before retirement age,” he concluded.