Embedding a compulsory introduction of Social Security Education Programme in every institution is also an effective way to change the behavior of employees , with regards to saving for retirement . There is a need for broadscale and effective communication and education campaigns to inform the general public on the key aspects of the reforms ; as well as the benefits of pension schemes - in order to gain understanding and support .
protection of the members ’ funds and to ensure prudent management . Additionally , schemes are obliged to produce audited accounts on an annual basis . In our case , members can access their statements online through our website or through our Mobile App , the CPF App .
Pension Reforms To Boost Retirement Savings In The Country
Advances in healthcare , diet and nutrition have increased life expectancy around the world . According to the World Health Organization ( WHO ), global life expectancy rose by five years between 2000 and 2015 , the fastest increase since the 1960s . While such is a positive indicator overall , it has nevertheless placed tremendous strain on retirement systems developed decades ago that were based on now outdated estimates of life expectancy and length of working life .
A recent report - released by Strathmore University and Institute of Human
Resource Management - indicated that only one in every seven working Kenyans is fully confident about their financial well-being after retirement . Even more worrying is the fact that a vast majority ( 86 %) risk sinking into poverty upon retirement . Furthermore , the study found that a majority of Kenyans have never estimated how much money they may need after retirement .
In fact , most do not have a plan that will secure their health needs once they retire but instead , have put their hope in friends and family donations . This , the report says , has made them even more vulnerable to impending poverty upon retirement with their savings not coming any closer to the average monthly expense that they will be facing .
It is owing to this that I posit that our country urgently needs to undertake pension reform in order to secure the over 86 % of the Kenyan workforce who are currently not covered by any form of retirement benefits saving vehicle . The most pertinent of issues surrounding the subject of social security in Kenya is the little coverage ; especially with regard to retirement . With less than 15 percent of the population covered with social security in old age , it is inevitable that a majority of Kenyans will retire into poverty - placing undue pressure on the economy in the years to come .
The Kenyan Government has , in the past - mulled over the idea of introducing a mandatory element into the current voluntary occupational and individual pension schemes ; along with proposals intended to increase the coverage - particularly among informal sector workers . In Kenya , the informal sector employs over 75 % of the work force today . The output of this sector contributes considerably to the economic output ( or Gross Domestic Product ) of the country . The sector , however , remains on the whole , unaccounted for and underestimated in many aspects .
The high proportion of workers in the informal sector and the low coverage of retirement benefits scheme for workers in the informal sector calls for policy reform , in order to adequately and sustainably address and solve the problem . The low coverage for the large number of workers sprouts from the nature of low contributions associated with the informal sector . Moreover , coverage is lacking due to the inconsistencies of program design , the lack of appropriate incentives for enrolment and the inability of the state to enforce mandatory contributions . So how can we solve the problem ? Automatic enrolment is one effective way to increase participation and boost retirement savings in our current nonmandatory private pension systems . To this end , we ought to seriously consider introducing an auto-enrolment by mobile phone through targeting daily-use goods and services such as airtime as one means of addressing this challenge of low remittance among informal sector workers . This approach will effectively leverage Kenya ’ s high level of mobile penetration , which currently stands at 88 % – according to the Communications Authority ( CA ).
As an incentive , the Government should match contributions shilling by shilling to make the system attractive . This will , also - further spur the industry to adopt innovative technological approaches that seek to leverage Kenya ’ s high mobile penetration and mobile financial services such as M-PESA . This is best illustrated by the success of CPF ’ s Mpension plan - which allows prospective members to register and make contributions for CPF ’ s Individual Pension Plan ( IPP ) through their mobile devices .
Radical reforms in the pensions industry will ensure employees can only access their pension contributions after retirement . Currently , members of pension schemes access up to 75 % of their benefits when they change employers . This defeats the purpose of saving for retirement . By limiting access to the funds , pension administrators will be able to make longterm investments on their members ’ contributions ; which will ensure better returns in the long-term and adequacy of benefits for retirees .
Mandatory Pension Can Boost Retirement Security For Vulnerable Workers
A vast majority of workers in both developed and developing countries still lack easy access to pension plans and savings products . In many cases , options are available but acceptance is low and the situation is further compounded by the lack of opportunity to begin saving , as well as inadequate encouragement to make saving a habit - severely limiting many people ’ s ability to accumulate savings .
In Kenya , for instance , the burden of catering for senior citizens will continue
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