Only one in seven working Kenyans is fully confident about their financial well-being after retirement. This is according to a Retirement Confidence Report released by a local pension administrator, Enwealth Financial Services in partnership with Strathmore University and the Institute of Human Resource Management.
The report established that the leading factors affecting the saving behaviors of working individuals and how they prepare to secure their life after retirement are their current income, health, number of dependents and literacy levels.
One of the key findings presented in the report is that the average Kenyan, saving in a pension scheme, will not be able to meet their monthly expenses with their retirement income. Respondents estimated they will need Sh50, 000 for upkeep expenses like housing, food, clothing and medical expenses. With a median gross annual salary of Sh2 million, it means Kenyans expectations translate to an estimated replacement ratio of only 40 percent compared to the recommended global standards of 75 percent.
The survey also showed that the average Kenyan man saves only a third of the money he anticipates he will need in retirement while the women saves half the amount they will need. Another finding was that 41 percent of millennials prioritize saving, contrary to the general opinion held that millennials mostly want to consume rather than save and invest. Those under 30 are more confident about retiring but they do not put their money in retirement benefits schemes in their early years.
Notably, more than 80 percent of respondents indicated that health and family medical histories do not affect how much they decide to save for retirement. Only 15 percent of the respondents said they worry about being unable to meet arising medical expenses during their retirement.
“There is a gap in ensuring adequacy of retirement savings. These findings suggest that financial literacy courses can include modules focusing on activities for anticipating an individuals expenses in retirement and that educating couples improves confidence in retirement. Therefore, institutional policies need to focus on effectiveness of financial literacy courses to trigger positive behavior leading to higher retirement confidence.” said the Enwealth CEO while presenting the findings.
Overall, only 15 percent of Kenyans are members of a registered pension scheme. Despite the low retirement confidence levels, the Retirement Benefits Authority in 2017 reported 16 percent increase in the value of pension fund assets to Sh1 trillion and anticipates tremendous growth in the sector.
Dr. Thomas Kibua, Director, Academic Programs, Institute of Public Policy & Governance, Strathmore University pointed out that the main objective of this survey is that the findings get absorbed by policy makers, pension players and financial educators in promoting the need to estimate retirement costs early to meet the anticipated retirement expenses.
