Kenya’s income replacement ratio of 34 per cent may be hindering Kenyan workers from voluntary retirement upon attaining the age of 60. This reduction in income implies that a person receiving sh60000 will now get sh20000 upon retirement.
In addition, a retirement confidence survey 2018 showed that only 1 in 7 Kenyans is very confident that they will outlive their retirement savings. Only 20 per cent of the Kenyan workforce is pensionable.
Mark Willie of Enwealth Financial Services opines that unless the retirees own a business that is raking in substantial revenues they may find it hard to retire voluntarily.
On top of that, there are few people are saving for retirement or in other cases, the pension contribution may be insufficient to cater to the basic needs of the savers. Kenya’s gross savings rate reduced to 6.1% in 2018 from 11.7% in 2007
He recommends that a successful pension is the accumulation of retirement savings that comes with accrued interest to early retirement age. Thus, the more years ahead of retirement one starts, the easier it will be to accumulate savings
In addition, the longer one leaves money in their pension, the more compound interest it will generate.
The disadvantage of people staying in the workforce for long is that they deny the young people an opportunity to kickstart their careers in order to boost savings.