Easy-pay pension scheme to benefit transport workers

The Retirement Benefits Authority (RBA) plans to launch a scheme targeting the transport industry next month to encourage savings in the informal sector.

The scheme, which aims to recruit 50,000 members, will help drivers and conductors to save a minimum of Sh20 every day on top of their employers’ contribution of Sh30.

RBA chief executive Edward Odundo said drivers and conductors could secure their livelihoods upon retirement in a sector that employs workers on a casual basis.

“We will launch a retirement scheme for workers in the public transport industry before the end of this year,” said Mr Odundo.

He said RBA had appointed a custodian (normally a bank) and was shopping for an administrator (insurance firms) and fund managers to put the money in bonds, equities and the property market.

Another scheme dubbed “Mbao Pension Plan” targeting workers in the informal sector was launched in June, with members from the Jua Kali industry paying Sh20 a day. It has so far netted more than 8, 100 people.

The authority is focusing on the informal sector to grow the country’s retirement benefits coverage —the ratio of the working population covered by pension schemes—from a paltry 15 per cent. These small numbers of pension contributors had assets worth Sh451 billion in 2010 compared to Sh223 billion in 2006.

Outliving one’s life savings has not been a major concern in Kenya because of the cushion provided by extended families in the rural areas.

But this is changing as rapid urban migration breaks the rural social fabric, increasing the number of households led by the elderly who are sinking deeper into poverty.

Lack of a retirement egg nest and the fact that life expectancy is improving in this segment of the population means that retirees will become a burden to their children for much longer than is currently the case.

RBA wants to create products targeting the informal sector, which accounts for about 75 per cent of the labour force, and which the private sector has neglected in the belief that it is not a fertile ground for growth.

Lack of pension plans for the millions of new migrants into Kenya’s rapidly growing towns and higher life expectancy means that these retirees will also burden the state without proper social security products. (SEE: Civil servants to enjoy life cover in new pension plan)

Simon Kimutai, the chairman of the Matatu Owners Association (MOA), said they were ready for the launch and that the co-operatives structure under which the public transport sector is now operating would ensure easy collection and transmission of members’ contributions. “Individual Saccos will collect members’ contributions and remit it to the custodian banks but the whole administrative structure is already in place and has been approved by the RBA,” said Mr Kimutai.

He said there were more than 200,000 workers in the public transport sector, including the matatu owners and their staff who lacked the means of saving for retirement and are likely to sign up for the scheme.

“We as employers have agreed to pay Sh30 daily for staff through their respective Saccos and we are anticipating a huge uptake across the country,” he said.